U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from _____________ to _________________
Commission file number 0-12724
BELMONT BANCORP.
(Name of issuer in its charter)
Ohio (State of Incorporation) I.R.S. Employer ID
No. 34-1376776
325 MAIN STREET
BRIDGEPORT, OHIO 43912
(Address of principal executive offices)
Telephone (614)-695-3323
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
Title of each class: Name of each exchange on
which registered:
Common stock, $0.50 par value NASDAQ SmallCap Market
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of the
Registrant's knowledge. In definitive proxy or information
statements incorporated by reference to Part III of this Form 10-
K or any amendment to this Form 10-K. X
Aggregate market value of voting stock held by nonaffiliates as
of March 6, 1998 - $121,568,000
There were 2,628,498 shares of $0.50 par value, common stock
outstanding as of March 6, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the Registrant dated March 20,
1998 are incorporated in Items 10, 11, 12, and 13. The Annual
Report of the Registrant is incorporated by reference in Items 5,
6, 7, and 8.
PART I
ITEM 1-BUSINESS
BELMONT BANCORP.
Belmont Bancorp. is a bank holding company which was
organized under the laws of the State of Ohio in 1982. On April
4, 1984, Belmont Bancorp. acquired all of the outstanding capital
stock of Belmont National Bank (formerly Belmont County National
Bank), a banking corporation organized as a national banking
association. Belmont National Bank provides a variety of
financial services. In addition to Belmont National Bank, the
Corporation owns Belmont Financial Network, Inc., a non-bank
subsidiary.
BELMONT NATIONAL BANK
Belmont National Bank resulted from the merger on January 2,
1959, of the First National Bank of St. Clairsville, and the
First National Bank of Bridgeport. Both banks were organized as
national associations prior to the turn of the century. Belmont
National Bank operates through a network of thirteen branches
located in Belmont, Harrison and Tuscarawas Counties in Ohio and
Ohio County in West Virginia. The main office is located in the
Woodsdale section of Wheeling, West Virginia. In addition to its
main office in West Virginia, the Bank operates a branch in the
Elm Grove section of Wheeling. Branch locations in Belmont
County, Ohio include St. Clairsville, Bridgeport, Lansing,
Shadyside, Ohio Valley Mall, Bellaire and Plaza West, St.
Clairsville. Branches in Harrison County are located in Jewett
and Cadiz, Ohio. Branches in Tuscarawas County are located in
New Philadelphia, Ohio. The three New Philadelphia offices were
acquired on October 2, 1992, when Belmont National Bank acquired
the deposits and loans of these offices from Diamond Savings and
Loan.
Belmont National Bank provides a wide range of retail
banking services to individuals and small to medium-sized
businesses. These services include various deposit products,
business and personal loans, credit cards, residential mortgage
loans, home equity loans, and other consumer oriented financial
services including IRA and Keogh accounts, safe deposit and night
depository facilities. Belmont National Bank also owns automatic
teller machines located at branches in Bellaire, Bridgeport,Elm
Grove, Cadiz, the Ohio Valley Mall, Plaza West and New
Philadelphia providing 24 hour banking service to our customers.
Belmont National Bank belongs to MAC, a nationwide ATM network
with thousands of locations nationwide. Belmont National Bank
offers a wide variety of fiduciary services. The trust
department of the Bank administers pension, profit-sharing,
employee benefit plans, personal trusts and estates.
BELMONT FINANCIAL NETWORK
On July 1, 1985, Belmont Bancorp. formed a subsidiary
corporation, Belmont Financial Network, Inc.(BFN). The purpose
of the subsidiary was primarily to engage in lease consulting for
personal or real property. Changes to the federal tax code that
eliminated new investment tax credits as of December 31, 1987
adversely affected the leasing business. The daily operations of
Belmont Financial Network were suspended during 1989 to reduce
overhead costs. The leases formerly serviced by Belmont
Financial Network are presently administered by Belmont National
Bank. BFN was inactive throughout 1996. During the fourth
quarter of 1997, BFN acted as a community development corporation
by investing as a limited partner in a low income housing project
that also includes historic renovation.
BELMONT INVESTMENT AND FINANCIAL SERVICES, INC.
During 1988, Belmont National Bank began the operations of
Belmont Investment and Financial Services, Inc., a wholly-owned
subsidiary of the Bank. Belmont Investment and Financial
Services, Inc. was organized so that the Bank's customers would
have available to them a wider array of financial products as
well as sound investment and financial planning. Through Belmont
Investment and Financial Services, Inc., customers can purchase
government or corporate bonds, and mutual fund products. In
1990, the services provided by the Corporation, other than
advisory services, were reorganized into a department of the
Bank.
SUPERVISION AND REGULATION
Belmont Bancorp. is subject to regulation under the Bank
Holding Company Act of 1956, as amended (the "Act"). The Act
requires the prior approval of the Federal Reserve Board for a
bank holding company to acquire or hold more than a 5% voting
interest in any bank, and restricts interstate banking
activities. The Act restricts Belmont's non-banking activities
to those which are closely related to banking. The Act does not
place territorial restrictions on the activities of nonbank
subsidiaries of bank holding companies. Belmont's banking
subsidiary is subject to limitations with respect to intercompany
loans and investments. A substantial portion of Belmont's cash
revenues is derived from dividends paid by its subsidiary bank.
These dividends are subject to various legal and regulatory
restrictions as summarized in Note 16 of the financial
statements.
The Bank is subject to the provisions of the National
Banking Act and the regulations of the Federal Reserve Board and
the Federal Deposit Insurance Corporation. Under the Bank
Holding Company Act of 1956, as amended, and under regulations of
the Federal Reserve Board pursuant thereto, a bank holding
company is prohibited from engaging in certain tie-in
arrangements in connection with extensions of credit.
The monetary policies of regulatory authorities, including
the Federal Reserve Board, have a significant effect on the
operating results of banks and bank holding companies. The
nature and future monetary policies and the effect of such
policies on the future business and earnings of Belmont Bancorp.
and its subsidiary bank cannot be predicted.
FOREIGN OPERATIONS
Belmont Bancorp. has no foreign operations.
EXECUTIVE OFFICERS
For information concerning executive officers of Belmont
Bancorp. and Belmont National Bank, see Item 10 of Form 10-K.
ITEM 2-PROPERTIES
DESCRIPTION ON PROPERTIES
In January 1996, the Bank relocated its corporate
headquarters to Wheeling, WV. The office is located at 980
National Road and consists of a 14,000 square floor combination
one and two story masonry block building. Approximately half of
the space is leased to a tenant. In addition, the Bank transacts
business in the following branch locations:
St. Clairsville Office-This office consists of a two story
brick building owned by the Bank with attached drive-in
facilities. The building consists of 9,216 square feet
which houses the commercial bank operations and the
executive and human resources offices.
Mall Office-This office is located at the Ohio Valley Mall,
a major shopping mall located two miles east of St.
Clairsville, Ohio, and consists of a 4,000 square foot
office inside the mall proper, plus a stand alone drive-in
facility at the perimeter of the Mall. Automatic teller
machines are located at the drive-in location and inside the
branch office.
Lansing Office-This 1,352 square foot office is located in
Lansing, Ohio, a small community approximately six miles
east of St. Clairsville on US. Route 40. The facility is a
masonry building with adjoining drive-in facilities.
Bridgeport Office-This office is located in Bridgeport,
Ohio, a community located on the Ohio/West Virginia border,
approximately 10 miles east of St. Clairsville. This 5,096
square foot facility is a recently remodeled masonry
building with adjoining drive-in facilities and an ATM.
Shadyside Office-This 1,792 square foot office is located in
Shadyside, a village located on Ohio State Route 7. The
facility is a masonry building with accompanying drive-in
facilities.
Jewett Office-This office is located in Harrison County
approximately twenty-six miles north of St. Clairsville,
across from Cross Street, the intersection of State Routes 9
and 151. The building is constructed of masonry brick and
contains 2,400 square feet with an accompanying drive-in
facility.
Cadiz Office-This office is located in Cadiz, Ohio in
Harrison County, approximately seventeen miles north of St.
Clairsville at the intersection of State Routes 9 and 22.
The brick and tile building contains 1,800 square feet with
an accompanying drive-in facility.
New Philadelphia Office-This office, located at 152 North
Broadway Avenue, is a 33,792 square foot site improved with
two inter-connected, two story brick office buildings with a
total building area of 13,234 square feet. Part of the
office space is leased to other businesses. This location
also has a drive-in facility and an automatic teller
machine.
New Philadelphia Office-This office, located at 2300 East
High Avenue, is comprised of a one story, 1,605 square foot
brick structure with a 783 square foot drive-thru canopy.
New Philadelphia Office-This office, located at 525 Wabash
Avenue, is comprised of a 14,250 square foot site with a 246
square foot drive-thru banking facility.
Elm Grove Office-This office is located at 2066 National
Road in Wheeling, WV, and includes a drive-thru facility and
an ATM.
Bellaire Office - This leased office, located in the
Imperial Shopping Center, is comprised of approximately
1,750 square feet with an adjoining drive-thru facility and
ATM.
Plaza West Solution Center - This office is located at the
west end of St. Clairsville and features a different concept
in retail banking. It includes a drive-thru facility and an
ATM.
All offices are owned by the Bank except for the Mall and
Bellaire offices. All leased offices contain renewal options.
The land for the Elm Grove office is also leased.
ITEM 3-LEGAL PROCEEDINGS
None.
ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
ITEM 5-MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDERS' MATTERS
The number of shareholders of record for the Corporation's stock
as of March 6, 1998 was 613. The closing price of Belmont
Bancorp. stock on March 6, 1998 was $46.25 per share.
Belmont Bancorp.'s common stock has a par value of $0.50
and, since October 1994, has been traded on the Nasdaq SmallCap
market.
1997
Dividend
Quarter High Low per Share
1st $22.40 $20.40 $0.136
2nd 25.20 20.80 0.136
3rd 30.00 25.13 0.170
4th 41.50 29.00 0.170
Total $0.612
1996
Dividend
Quarter High Low per Share
1st $22.00 $20.00 $0.104
2nd 22.40 20.80 0.120
3rd 22.40 20.80 0.120
4th 22.00 20.40 0.136
Total $0.480
The tables above show its high and low market prices and
dividend information for the past two years. Market prices and
cash dividends paid per share have been restated to reflect the
effect of a 5-for 4 common stock split effected in the form of a
25% common stock dividend paid July 1, 1997.
Information regarding the limitations on dividends available
to be paid can be located in Footnote 16 of the Notes to the
Consolidated Financial Statements in the Corporation's Annual
Report (Exhibit B).
Treasury stock is accounted for using the cost method.
There were 6,665 shares and 832 shares held in treasury on
December 31, 1997 and 1996, respectively.
ITEM 6.-SELECTED FINANCIAL DATA
The Summarized Quarterly Financial Information and the
Consolidated Five Year Summary of Operations contained in the
Corporation's annual report (Exhibit B) are hereby incorporated
by reference.
ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The data presented in this discussion should be read in
conjunction with the audited consolidated financial statements.
RESULTS OF OPERATIONS
SUMMARY
For 1997, net income increased 18.9% from the previous year;
net income for the year ended 1996 also increased 18.9% compared
to 1995. Net income per common share for 1997 was $2.25 compared
to $1.87 per common share in 1996 and $1.56 in 1995. Return on
average common shareholders' equity was 20.21% for 1997, up from
19.55% in 1996 and 18.90% in 1995. The Corporation's net income
to average assets, referred to as return on assets, increased to
1.62% for the year ended 1997 from 1.49% last year and 1.35%
during 1995. Operating income consists of earnings before income
taxes, minus net investment and trading gains or plus net
investment and trading losses. Operating income increased by
$185,000 or 2.9% from 1996 to 1997. The table below summarizes
earnings performance for the past three years.
($000s) except per share data 1997 1996 1995
Operating income $6,567 $6,382 $5,437
Net income 5,945 5,002 4,206
Net income per share $ 2.25 $ 1.87 $ 1.56
Return on average assets 1.62% 1.49% 1.35%
Return on average common equity 20.21% 19.55% 18.90%
Return on average total equity 20.21% 19.05% 18.42%
NET INTEREST REVENUE
A major share of the Corporation's income results from the
spread between income on interest earning assets and interest
expense on the liabilities used to fund those assets, known as
net interest income. Net interest income is affected by changes
in interest rates and amounts and distributions of interest
earning assets and interest bearing liabilities outstanding. Net
interest margin is net interest income divided by the average
earning assets outstanding. A third frequently used measure is
net interest rate spread which is the difference between the
average rate earned on assets and the average rate incurred on
liabilities without regard to the amounts outstanding in either
category.
The Consolidated Average Balance Sheets and Analysis of Net
Interest Income Changes included in the Corporation's annual
report (Exhibit B), compare interest revenue and interest earning
assets outstanding with interest cost and liabilities outstanding
for the years ended December 31, 1997, 1996, and 1995, and
computes net interest income, net interest margin and net
interest rate spread for each period. All three of these
measures are reported on a taxable equivalent basis.
The Corporation's net interest income grew by $1,002,000 on
a taxable equivalent basis during 1997 compared to the same
period last year, a 7.1% increase. The increase in net interest
income was attributable to an increase in average earning assets.
During 1997, the Corporation's average interest-earning assets
grew by approximately $28.7 million, up 9.1% from 1996.
The yield on interest earning assets was up 15 basis points
from 8.28% in 1996 to 8.43% in 1997. However the cost of
interest bearing liabilities rose 25 basis points from 1996 to
1997. Consequently, the net interest rate spread decreased from
3.95% during 1996 to 3.84% during 1997. The taxable equivalent
net interest margin was 4.37% during 1997 compared to 4.45% for
1996 and 4.55% during 1995.
The Analysis of Net Interest Income Changes, separates the
dollar change in the Corporation's net interest income into
three components: changes caused by (1) an increase or decrease
in the average assets and liability balances outstanding
(volume); (2) the changes in average yields on interest earning
assets and average rates for interest bearing liabilities
(yield/rate); and (3) combined volume and yield/rate effects
(mix).
This table shows that the increase in the Corporation's net
interest income during the year-to-date periods presented from
1996 to 1997 was generated by growth in the levels of earning
assets and average interest bearing liabilities outstanding
(depicted by the volume column).
OTHER OPERATING INCOME
Other operating income excluding securities gains and
losses, increased 8.0% and totaled $2,010,000 in 1997, compared
to $1,861,000 in 1996 and $1,683,000 in 1995. The table below
shows the dollar amounts and growth rates of the components of
other operating income.
1997 1996 1995
($000s) Total Change Total Change Total
Trust income $ 466 -7.17% $ 502 21.55% $ 413
Service charges on deposits 707 7.12% 660 18.92% 555
Gain on sale of loans 91 26.39% 72 -47.06% 136
Recovery on class action lawsuit - -100.00% 27 -85.71% 189
Other income 746 24.33% 600 53.85% 390
Subtotal 2,010 8.01% 1,861 10.58% 1,683
Investment securities gains(losses) (3) -200.00% (1) 90.91% (11)
Gains (losses) on securities
available for sale 802 102.02% 397 251.33% 113
Total $2,809 24.46% $2,257 26.44% $1,785
During the fourth quarters of 1996 and 1995, the Corporation
recovered $27,000 and $189,000, respectively for settlement of a
class action lawsuit arising out of the issuance and sale of
taxable municipal bonds.
Gains on sale of loans contributed $91,000 to noninterest
income during 1997, up from $72,000 in 1996. The Corporation
utilizes the secondary mortgage market to divest itself of fixed
rate mortgage loans with rates below a target rate for purposes
of managing the interest rate risk associated with these loans.
Servicing rights were retained on the loans sold. The
Corporation continues to utilize the secondary market as a means
of offering competitively priced mortgage loan products without
retaining the interest rate risk associated with long term, fixed
rate product.
Losses on investments held in the maturity portfolio during
1997 and 1996 occurred as a result of calls on municipal bonds in
the portfolio. These losses totaled $3,000 during 1997 and 1,000
during 1996. Net gains were realized on securities available for
sale during 1997 totaling $802,000 compared to gains of $397,000
during 1996 and losses of $113,000 during 1995. The related
income taxes on securities transactions, including trading and
securities available for sale, were $174,000, $104,000, and
$25,000 for the years ended 1997, 1996 and 1995, respectively.
OPERATING EXPENSES
Successful expense control is an essential element in
maintaining the Corporation's profitability. The table below
details the percentage changes in various categories of expense
for the three years ended 1997, 1996, and 1995.
($000s) 1997 % Change 1996 % Change 1995
Salaries and wages $3,034 14.66% $2,646 3.56% $2,555
Employee benefits 914 15.70% 790 -1.50% 802
Net occupancy expense 783 14.14% 686 24.28% 552
Equipment expense 947 15.91% 817 6.94% 764
FDIC insurance 64 -87.74% 522 38.46% 377
Other operating expenses 2,990 2.15% 2,927 13.76% 2,573
Total $8,732 4.10% $8,388 10.04% $7,623
Management strives to maintain the Corporation's efficiency
ratio at or below 50%. (The efficiency ratio is computed by
dividing the sum of fully taxable equivalent net interest margin
plus non-interest income by non-interest expenses.) For the year
ended 1997, the efficiency ratio was 48.8% compared to 51.4% in
1996 and 50.6% in 1995.
Salaries and wages included incentive performance bonuses
tied to earnings performance totalling $299,000 in 1997, $243,000
during 1996 and $343,000 during 1995. Overall, operating expenses
were impacted by the addition of two new offices in Wheeling, West
Virginia during 1996 and new offices in Bellaire, Ohio and at Plaza
West in St. Clairsville, Ohio in 1997.
Other non-interest operating expense includes FDIC insurance
assessments. FDIC insurance expense included in other operating
expenses were $64,000, $522,000 and $377,000 in 1997, 1996 and
1995, respectively, including a one time, pre-tax assessment on
deposits insured through the Savings Association Insurance Fund
during the third quarter of 1996 totaling $397,000.
Taxes, other than payroll and real estate taxes, included in
noninterest expense totaled $426,000 during 1997, up from
$395,000 in 1996. This includes the Ohio state corporate
franchise tax based on the equity of the subsidiary bank.
Other noninterest expense also includes expense associated
with other real estate owned. During 1997 this expense was
$20,000 compared to $143,000 during 1996. Expenses associated
with one property which was disposed of during the fourth quarter
of 1996 totaled $140,000.
Federal income taxes were reduced by $482,000 in historic
tax credits associated with a low income housing project that the
subsidiary, Belmont Financial Network, invested in as a limited
partner during the fourth quarter of 1997. The project is expected
to generate low income housing credits in excess of $150,000 in
each of the next ten years.
FINANCIAL CONDITION
SECURITIES
The book values of investments as of December 31, 1997 and
1996 are detailed in Footnote 3 of the Notes to the Consolidated
Financial Statements in the Corporation's annual report (Exhibit
B).
The investment portfolio consists largely of fixed and
floating rate mortgage related securities, predominantly
underwritten to the standards of and guaranteed by the government
agency GNMA and by the government-sponsored agencies of FHLMC and
FNMA. These securities differ from traditional debt securities
primarily in that they have uncertain maturity dates and are
priced based on estimated prepayment rates on the underlying
mortgages.
The maturities and yields of securities held to maturity and
available for sale (excluding equity securities) are detailed in
the following tables.
Securities Held to Maturity
December 31, 1997
U.S.
Government States and Agency
agencies and Political mortgage-backed
Maturity Period corporations Subdivisions(a) securities(b) Total
Less than 1 year 2,260 466 - 2,726
Yield 4.80% 3.06% 4.50%
1-5 Years - 1,714 6,455 8,169
Yield 8.17% 6.98% 7.23%
6-10 Years - 332 1,725 2,057
Yield 10.68% 7.60% 8.10%
Over 10 Years - 1,975 1,028 3,003
Yield 10.07% 8.77% 9.63%
Total 2,260 4,487 9,208 15,955
Yield 4.80% 8.66% 7.30% 7.33%
Securities Available for Sale
December 31, 1997
At estimated fair value
<TABLE>
<CAPTION>
U.S. U.S. Govt. States and Agency Mortgage Total
Treasury agencies and political mortgage-backed derivatives Fair Amortized
Maturity Period securities corporations subdivisions(a) securities(b) securities(b) Value Cost
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 1 year - - - 180 1,524 1,704 1,705
Yield 3.24% 5.48% 5.25%
1-5 Years 100 6,528 - 36,873 20,445 63,946 64,131
Yield 6.38% 6.75% 6.37% 6.61% 6.40%
6-10 Years - 8,264 103 18,605 - 26,972 26,851
Yield 6.35% 7.58% 7.19% 6.93%
Over 10 Years - - 18,075 3,294 2,462 23,831 23,465
Yield 8.10% 9.05% 7.73% 8.19%
Total fair value 100 14,792 18,178 58,952 24,431 116,453 116,152
Yield 6.38% 6.53% 8.10% 6.77% 6.65% 6.87%
(a) Taxable equivalent yields
(b) Maturities of mortgage-backed securities are based on
estimated average life.
</TABLE>
At December 31, 1997, there were no securities of a single
issuer, other than U.S. Treasury or other U.S. government agency
securities, which exceeded 10% of shareholders' equity.
The state and political subdivision portfolio includes
approximately $2.4 million zero coupon revenue bonds. These
bonds are purchased at a significant discount to par value and
the income recognized on the bonds is derived from the accretion
of the discount using a method that approximates a level yield.
MARKETABLE EQUITY SECURITIES
The Corporation held marketable equity securities in its
investment portfolio as of December 31, 1997. In accordance with
regulatory requirements, all equity securities were transferred
to Securities Available for Sale on January 1, 1994 because these
securities do not have a stated maturity. Current accounting
principles require that marketable equity securities be recorded
at the lower of cost or market value with a corresponding
adjustment to reduce shareholders' equity if market value is
lower than cost. At December 31, 1997 and 1996, estimated market
values approximated original cost.
Taxable
Equivalent
December 31, 1997 ($000s) Cost Market Value Yield
Federal Home Loan Bank Stock $4,450 $4,450 7.19%
Corporate Stock 66 66 5.17%
Federal Reserve Bank Stock 187 187 6.00%
$4,703 $4,703
Taxable
Equivalent
December 31, 1996 ($000s) Cost Market Value Yield
Federal Home Loan Bank Stock $2,960 $2,960 7.00%
Corporate Stock 120 120 8.00%
Federal Reserve Bank Stock 187 187 6.00%
$3,267 $3,267
LOANS AND LEASES
The following table shows the history of commercial and
consumer loans and leases, including loans held for sale, by
major category at December 31.
($000s) 1997 1996 1995 1994 1993
Commercial loans:
Real estate construction $ 1,418 $ 1,327 $ 1,530 $ 1,801 $ 2,081
Acceptances of other banks 0 0 0 0 0
Real estate mortgage 19,984 25,954 28,744 23,701 21,211
Commercial, financial
and agricultural 109,618 80,554 50,532 38,983 25,317
Direct financing leases 0 0 3 5 9
Total commercial loans $131,020 $107,835 $80,809 $64,490 $48,618
Consumer loans:
Residential mortgage $ 77,995 $ 71,715 $69,999 $76,094 $70,301
Installment loans 14,435 7,626 6,959 5,116 5,281
Credit card and other
consumer 1,450 1,607 2,190 1,396 1,032
Total consumer loans $ 93,880 $ 80,948 $79,148 $82,606 $76,614
Total loans and leases $224,900 $188,783 $159,957 $147,096 $125,232
An analysis of maturity and interest rate sensitivity of business
loans at the end of 1997 follows:
Under 1 to 5 Over 5
($000s) 1 Year Years Years Total
Domestic loans:
Real estate construction $ 1,145 $ 18 $ 255 $ 1,418
Real estate mortgage 13,285 1,880 4,818 19,983
Commercial, financial
and agricultural 53,560 41,722 13,442 108,724
Direct financing leases 0 0 0 0
Total business loans (a) $67,990 $43,620 $18,515 $130,125
Rate sensitivity:
Predetermined rate $ 3,518 $21,303 $17,833 $ 42,654
Floating or adjustable rate 64,472 22,317 682 87,471
Total domestic business loans $67,990 $43,620 $18,515 $130,125
Foreign loans 0 0 0 0
(a) does not include nonaccrual loans
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation, as part of its philosophy of risk
management, has established various credit policies and
procedures intended to minimize the Corporation's exposure to
undue credit risk. Credit evaluations of borrowers are performed
to ensure that loans are granted on a sound basis. In addition,
care is taken to minimize risk by diversifying specific industry.
Credit risk is continuously monitored by Management through the
periodic review of individual credits to ensure compliance with
policies and procedures. Adequate collateralization, contractual
guarantees, and compensating balances are also utilized by
Management to mitigate risk.
Management determines the appropriate level of the allowance
for possible loan losses by continually evaluating the quality of
the loan portfolio. The reserve is allocated to specific loans
that exhibit above average credit loss potential based upon their
payment history and the borrowers' financial conditions. The
adequacy of the allowance for possible loan losses is evaluated
based on an assessment of the losses inherent in the loan
portfolio. This assessment results in an allowance consisting of
two components, allocated and unallocated. The allocations are
made for analytical purposes. The total allowance is available
to absorb losses from any segment of the portfolio. Management
maintains a watch list of substandard loans for monthly review.
Although these loans may not be delinquent and may be adequately
secured, Management believes that due to location, size, or past
payment history, it is necessary to monitor these loans monthly.
The allowance for possible loan losses totaled $4,134,000,
or 1.84% of total loans and leases at December 31, 1997. At the
end of the previous year, the allowance for possible loan losses
was $3,153,000, or 1.67% of total loans and leases. The provision
charged to expense during 1997 was $1,055,000 compared to $465,000
in the year ago period.
Management's allocation of the allowance for possible loan
losses for the past five years based on estimates of potential
future loan loss is set forth in the table below:
($000s) 1997 1996 1995 1994 1993
Specific reserves:
Commercial $ 560 $ 330 $ 310 $ 10 $ 960
Mortgage 0 10 10 5 38
Consumer 161 176 5 7 21
Criticized loans without
specific allocation 470 296 414 315 160
Provision for loan
categories based on
historical loss
experience:
Commercial 2,063 1,607 1,344 687 335
Commercial real estate 313 269 152 103 7
Residential mortgage 358 328 325 298 28
Consumer 209 137 143 112 68
Total $ 4,134 $ 3,153 $ 2,703 $ 1,537 $ 1,617
Total loans and leases
outstanding $224,899 $188,783 $159,957 $147,096 $125,232
Reserves as a % of total loans
($000s) 1997 1996 1995 1994 1993
Specific reserves:
Commercial 0.25% 0.17% 0.19% 0.01% 0.77%
Mortgage 0.00% 0.01% 0.01% 0.00% 0.03%
Consumer 0.07% 0.09% 0.00% 0.00% 0.02%
Criticized loans without
specific allocation 0.21% 0.16% 0.26% 0.21% 0.13%
Provision for loan categories
based on historical loss
experience:
Commercial 0.92% 0.85% 0.84% 0.47% 0.27%
Commercial real estate 0.14% 0.14% 0.10% 0.07% 0.01%
Residential mortgage 0.16% 0.17% 0.20% 0.20% 0.02%
Consumer 0.09% 0.07% 0.09% 0.08% 0.05%
Total 1.84% 1.67% 1.69% 1.04% 1.29%
The following table sets forth the five year historical
information on the reserve for loan losses:
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Five year history
($000s) 1997 1996 1995 1994 1993
Balance as of January 1 $3,153 $2,703 $1,537 $1,617 $1,024
Provision of loan losses 1,055 465 1,150 805 577
Adjustment incident to
acquisition 0 0 0 0 0
Loans charged off:
Real estate 24 30 25 49 19
Commercial 23 0 0 806 0
Consumer 43 32 26 85 15
Direct financing leases 0 0 0 0 0
Total loans charged-off 90 62 51 940 34
Recoveries of loans
previously charged-off:
Real estate 2 2 3 18 0
Commercial 1 0 1 29 21
Consumer 13 45 18 7 11
Direct financing leases 0 0 45 1 18
Total recoveries 16 47 67 55 50
Net charge-offs (recoveries) 74 15 (16) 885 (16)
Balance at December 31 $4,134 $3,153 $2,703 $1,537 $1,617
($000s) 1997 1996 1995 1994 1993
Loans and leases outstanding
at December 31 $224,899 $188,783 $159,957 $147,096 $125,232
Allowance as a percent of
loans and leases outstanding 1.84% 1.67% 1.69% 1.04% 1.29%
Average loans and leases $208,265 $174,445 $152,502 $134,952 $120,218
Net charge-offs as a percent
of Average loans and leases 0.04% 0.01% -0.01% 0.66% -0.01%
The following schedule shows the amount of under-performing
assets and loans 90 days or more past due but accruing interest.
UNDER-PERFORMING ASSETS
($000s) 1997 1996
Nonaccrual loans and leases $1,515 $143
Loans 90 days or more past
due but accruing interest 44 74
Other real estate owned 20 66
Total $1,579 $283
In addition to the above schedule of non-performing assets,
Management prepares a watch list consisting of loans over
$150,000 which Management has determined require closer monitoring
to further protect the Corporation against loss. The balance of
loans classified by Management as substandard due to delinquency
and a change in financial position at the end of 1997 and not
included in the table above was $3,693,000. There are no other
loans classified for regulatory purposes that would materially
impact future operating results, liquidity or capital resources
or which management doubts the ability of the borrower to comply
with loan repayment terms.
DEPOSITS
Primarily core deposits are used to fund interest-earning
assets. The Corporation has a lower volume of interest-free
checking accounts than its peer group which is typical for its
market area. This results in an overall higher cost of funds
than peer average. The accompanying tables show the relative
composition of the Corporation's average deposits and the change
in average deposit sources during the last three years.
AVERAGE DEPOSITS ($000s) 1997 1996 1995
Demand $ 29,878 $ 27,878 $ 25,819
Interest bearing checking 43,476 38,576 25,953
Savings 78,636 79,341 78,679
Other time 101,405 99,649 108,578
Certificates-$100,000 and over 13,899 12,008 12,751
Total average deposits $267,294 $257,452 $251,780
DISTRIBUTION OF AVERAGE DEPOSITS 1997 1996 1995
Demand 11.18% 10.83% 10.26%
Interest bearing checking 16.27% 14.98% 10.31%
Savings 29.42% 30.82% 31.25%
Other time 37.94% 38.71% 43.12%
Certificates-$100,000 and over 5.20% 4.66% 5.06%
Total 100.00% 100.00% 100.00%
CHANGE IN AVERAGE
DEPOSIT SOURCES ($000s) 1996 to 1997 1995 to 1996
Demand $2,000 $ 2,059
Interest bearing checking 4,900 12,623
Savings (705) 662
Other time 1,756 (8,929)
Certificates-$100,000 and over 1,891 (743)
Total $9,842 $ 5,672
BORROWINGS
Other sources of funds for the Corporation include short-
term repurchase agreements and Federal Home Loan Bank borrowings.
Borrowings at the Federal Home Loan Bank are utilized to match
the maturities of selected loans and to leverage the capital of
the Corporation to enhance profitability for shareholders.
CAPITAL RESOURCES
At December 31, 1997, shareholders' equity was $31,899,000
compared to $27,332,000 at December 31, 1996, an increase of
$4,567,000 or 16.7%. The increase in capital during 1997 was due
prmarily to the retention of earnings. During the fourth quarter
of 1996, the Corporation retired $1,000,000 in senior cumulative
preferred stock.
The Federal Reserve Board has adopted risk-based capital
guidelines that assign risk weightings to assets and off-
balance sheet items. The guidelines also define and set
minimum capital requirements (risk-based capital ratios).
Bank holding companies are required to have core capital (Tier
1) of at least 4.0% of risk-weighted assets and total capital
of 8.0% of risk-weighted assets. Tier 1 capital consists
principally of shareholders' equity less goodwill, while total
capital consists of core capital, certain debt instruments and
a portion of the reserve for loan losses. At December 31,
1997, the Corporation had a Tier 1 capital ratio of 11.8% and
a total capital ratio of 10.6%, well above the regulatory
minimum requirements.
The following table shows several capital and liquidity
ratios for the Corporation for the last three years:
December 31 1997 1996 1995
Average shareholder's equity
to:
Average assets 8.02% 7.81% 7.34%
Average deposits 11.01% 10.20% 9.07%
Average loans and leases 14.13% 15.06% 14.97%
Primary capital 9.10% 9.13% 8.78%
Risk-based capital ratio:
Tier 1 11.81% 12.43% 13.07%
Total 10.60% 13.68% 14.32%
Leverage ratio 8.00% 7.93% 7.39%
National banks must maintain a total assets leverage
ratio of at least 3.0%. The total assets leverage ratio is
calculated by dividing capital less intangibles into assets,
net of intangibles. In many cases, regulators require an
additional cushion of at least 1.0% to 2.0%. At December 31,
1997, the Corporation's Tier One leverage ratio was 8.00%.
The following table presents dividend payout ratios for the
past three years.
1997 1996 1995
Total dividends declared
as a percentage of net income 27.17% 26.59% 25.77%
Common dividends declared
as a percentage of earnings
per common share 27.20% 25.64% 24.36%
Currently there are no known trends, events or
uncertainties that would have a material effect on the
Corporation's liquidity, capital resources or results of
operations.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation meets its liability based needs through the
operation of Belmont National Bank's branch banking network that
gathers demand and retail time deposits. The Bank also acquires
funds through repurchase agreements and overnight federal funds
that provide additional sources of liquidity. Total deposits
increased by $2.4 million, or 0.9%, from the end of 1996 to 1997.
Average deposits increased $9.8 million, or 3.8%, during 1997
compared to 1996.
The Bank has utilized alternative funding sources to
leverage shareholders' equity and improve overall profitability.
Sources include the Federal Home Loan Bank of Cincinnati and
various correspondent bank relationships.
The Bank also has lines of credit with various correspondent
banks totaling $6,500,000 which may be used as an alternative
funding source; the unused portion of these lines at December 31,
1997 was $694,000. In addition, the Bank has a line of credit
with the Federal Home Loan Bank of Cincinnati for $30 million.
At December 31, 1997, the balance of the overnight cash
management advance was $8,829,000 with an available balance of
$21,171,000. The Bank also has a repurchase-agreement based
advance with the Federal Home Loan Bank for $70 million. All
borrowings at the Federal Home Loan Bank are subject to eligible
collateral requirements.
INTEREST RATE SENSITIVITY
The Corporation's net interest revenue can be vulnerable to
wide fluctuations arising from a change in the general level of
interest rates to the degree that the average yield on assets
responds differently to such a change than does the average cost
of funds. To maintain a consistent earnings performance, the
Corporation actively manages the repricing characteristics of its
assets and liabilities to control net interest income rate
sensitivity.
The mismatching of asset and liability repricing
characteristics in specific time frames is referred to as
interest rate sensitivity gaps. Mismatching or "gapping" can be
profitable when the term structure of interest rates (the yield
curve) is positive, i.e. short term yields are lower than long
term yields, but gapping entails an element of risk, particularly
in volatile markets. An institution is said to have a negative
gap when its liabilities reprice in a shorter time period than
its assets. A positive gap exists when assets reprice more
quickly than liabilities. A negative gap in a period when the
general level of interest rates is declining will produce a
larger net interest income spread than would be the case if all
assets and liabilities were perfectly matched. Conversely, net
interest income will be adversely affected by a negative gap
position in a period when the general level of interest rates is
rising. Gaps, therefore, must be prudently managed.
The Corporation examines its interest rate sensitivity
position by categorizing the balance sheet into respective
repricing time periods similar to those shown on the accompanying
table. Repricing of certain assets, such as installment loans,
mortgage loans and leases, is based upon contractual amortization
or repricing, although experience indicates that they reprice
more quickly due to early payoffs. Mortgage-backed securities
are included in maturity/repricing categories based upon
historical prepayment speeds. Based upon historical deposit rate
relationships, savings and interest bearing checking are
partially included in the non-rate sensitive category since rate
changes on these products are not completely sensitive to
fluctuations in the interest rate environment.
Asset/liability management encompasses both interest rate
risk and liquidity management. The resulting net cumulative gap
positions reflect the Corporation's sensitivity to interest rate
changes over time. The calculation is a static indicator and is
not a net interest income predictor of a dynamic business in a
volatile environment. As a static indicator, the gap methodology
does capture major trends.
<TABLE>
Rate Sensitivity Analysis
December 31, 1997
<CAPTION>
Maturing or repricing
Non-Rate
Total Sensitive
31-90 91-180 181-365 1 year 1-5 & over
1-30 days days days days & under years 5 years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning
assets:
Loans and leases $54,723 $10,320 $11,965 $21,025 $98,033 $ 60,971 $ 65,895 $224,899
Investment securities 0 2,555 754 474 3,783 7,565 4,607 15,955
Securities available
for sale 13,051 0 11,686 25,302 50,039 35,519 35,598 121,156
Total interest
earning assets 67,774 12,875 24,405 46,801 151,855 104,055 106,100 362,010
Interest bearing
liabilities:
Interest checking 1,504 1,504 31,959 33,463
Savings 18,101 18,101 61,728 79,829
Certificates-$100,000
and over 3,053 2,913 4,093 4,526 14,585 1,996 1,135 17,716
Other time 8,925 17,797 14,202 20,546 61,470 29,960 11,483 102,913
Repurchase agreements 756 756 756
Short term borrowings 14,635 14,635 14,635
Long term debt 10,000 2,000 12,000 17,635 40,000 69,635
Total interest
bearing liabilities 56,974 20,710 20,295 25,072 123,051 49,591 146,305 318,947
Rate sensitivity gap 10,800 -7,835 4,110 21,729 28,804 54,464 -40,205 43,063
Cumulative gap $10,800 $ 2,965 $ 7,075 $28,804 $ 83,268 $ 43,063
Cumulative gap as a
percentage of
interest earning
assets 2.98% .82% 1.95% 7.96% 23.00% 11.90%
Interest bearing checking and savings deposits that have no
contractual maturity are scheduled in the table above according
to Management's best estimate of their repricing sensitivity to
changes in market rates.
Year 2000
The Corporation initiated the process of preparing its
computer systems and applications for the Year 2000 during 1997.
This process involves modifying or replacing certain hardware and
software maintained by the Corporation as well as communicating
with external service providers to ensure that they are taking
the appropriate action to remedy their Year 2000 issues.
Management expects testing for Year 2000 functionality to be
complete by the end of 1998. Purchased hardware and software
will be capitalized in accordance with normal policy. Personnel
and other costs related to the project will be expensed as
incurred. The Corporation does not expect to spend any
significant amounts with outside contractors relative to the
completion of this task. Therefore, cost estimates do not
represent any material incremental costs, but rather will
represent the redeployment of existing technology resources. The
majority of information systems are vendor-supplied, and all
vendors have provided a certification or a delivery commitment
letter. Management believes that modifications to existing
systems, conversions to new systems, and vendor delivery of
millennium-compliant systems will be resolved on a timely basis,
and any related costs will not have a material impact on the
operations, cash flows, or financial condition of future periods.
ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
The annual report of Belmont Bancorp. is hereby incorporated
by reference and appears as Exhibit B. Management's report on
their responsibility for financial reporting is included in the
Corporation's annual report.
ITEM 9 - DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing in Belmont Bancorp.'s definitive proxy
statement dated March 20, 1998 (Exhibit C) is incorporated by
reference in response to this item.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 1, 1998:
Name Age Position
J. Vincent Ciroli, Jr. 52 President and Chief Executive Officer,
Belmont Bancorp. & Belmont National Bank
William Wallace 42 Vice President, Belmont Bancorp.;
Executive Vice President & Chief
Operating Officer, Belmont National Bank
Jane R. Marsh 36 Secretary, Belmont Bancorp.;
Senior Vice President, Controller &
Cashier, Belmont National Bank
Each of the officers listed above has been an executive
officer of the Corporation or one of its subsidiaries during the
past five years.
ITEM 11 - EXECUTIVE COMPENSATION
The information appearing in Belmont Bancorp.'s definitive
proxy statement dated March 20, 1998 (Exhibit C) is incorporated
by reference in response to this item.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing in Belmont Bancorp.'s definitive
proxy statement dated March 20, 1998 (Exhibit C) is incorporated
by reference in response to this item.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in Belmont Bancorp.'s definitive
proxy statement dated March 20, 1998 (Exhibit C) is incorporated
by reference in response to this item.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 16, 1998.
By Terrence A. Lee, Chairman BELMONT BANCORP
Terrence A. Lee, Chairman (Registrant)
John A. Belot s/John A. Belot Director
Vincent Ciroli, Jr. s/J. Vincent Ciroli, Jr. Director, President
& CEO. Belmont Bancorp.,
Belmont National Bank
Samuel Mumley s/Samuel Mumley Director
Mary L. Holloway Haning s/Mary L. Holloway Haning Director
Charles J. Kaiser, Jr. s/Charles J. Kaiser, Jr. Director
John H. Goodman, II Director
Dana Lewis s/Dana Lewis Director
Jane R. Marsh s/Jane R. Marsh Secretary, Belmont
Bancorp. and
Sr. Vice President,
Controller
& Cashier, Belmont
National Bank
James Miller Director
W. Quay Mull, II s/W. Quay Mull, II Director
Tom Olszowy s/Tom Olszowy Director
Keith Sommer s/Keith Sommer Director
William Wallace s/William Wallace Director &
Vice President,
Belmont Bancorp.;
Executive Vice
President & COO,
Bank
Charles A. Wilson, Jr. Vice Chairman
Terrence A. Lee Chairman of the Board
Terrence A. Lee
March 16, 1998
</TABLE>
EXHIBIT 1 - CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Belmont Bancorp.
We consent to incorporation by reference of our report dated
January 23, 1998, relating to the consolidated balance sheets of
Belmont Bancorp. as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and
statements of cash flows for each of the three years in the period
ended December 31, 1997. Said report appears as Exhibit 2 of Belmont
Bancorp.'s annual form 10-K.
s/S.R. Snodgrass A.C.
S.R. Snodgrass A.C.
Wheeling, WV
March 16, 1998
The Belmont Bancorp. 1997 Annual Report
The 1997 Annual Report Cover
This chart artistically compares Belmont
Bancorp.'s 5 year compound annual return to
shareholders of 50.94% to similar size banks and
other familiar indices. A complete chart, with
axes labels and a table, is provided on page 10
of this annual report.
Dedication
Robert N. Lewis, M.D.
William Q. Mull
The Belmont Bancorp. 1997 Annual Report is
dedicated to Dr. Robert N. Lewis and Mr. William
Q. Mull.
Dr. Lewis and Mr. Mull served loyally and with
dedication as Board of Directors' members of
Belmont Bancorp. and Belmont National Bank.
With nearly 30 years of total service to the
Corporation, the contribution these gentlemen
have made are significant and deeply appreciated
by all. Bob and Bill's friendship and talent
are missed.
Corporate Profile
Belmont Bancorp. (the Corporation) is a $389
million bank holding company, incorporated in
Ohio. Belmont National Bank, a wholly-owned
subsidiary of the Corporation, is an FDIC-
insured, federally chartered commercial bank.
The Bank delivers a comprehensive range of
financial products and services to individuals,
families, businesses and corporations through
thirteen full service offices and two drive-up
service locations. Belmont National Bank's
primary market areas for its consumer,
commercial, trust and investment services are
Belmont, Harrison, Tuscarawas and Jefferson
counties in Ohio, and Marshall and Ohio counties
in West Virginia.
Financial Highlights
(unaudited) (000's except per share data)
1997 1996 % change
Net income $ 5,945 $ 5,002 18.9%
Operating Return on average assets 1.62% 1.49%
results Return on average common equity 20.21% 19.55%
Return on average total equity 20.21% 19.05%
Per Net income $ 2.25 $ 1.87 20.5%
common Dividend 0.612 0.480 27.5%
share Book value at year-end 12.09 10.34 17.0%
At Total assets $388,713 $333,903 16.4%
year- Total loans 224,900 188,783 19.1%
end Total deposits 263,908 261,539 0.9%
Total shareholders' equity 31,899 27,332 16.7%
Liquidity Average common equity
and to average total assets 8.02% 7.51%
capital Average total equity
ratios to average total assets 8.02% 7.81%
Tier one capital ratio 11.81% 12.43%
Total risk-based capital ratio 13.06% 13.68%
Leverage ratio 8.00% 7.93%
Dividend payment ratio 27.17% 26.59%
From Management
We are pleased to report that we have just concluded the
most successful year in the 151 year history of Belmont
Bancorp. Performance improvement was shown in nearly
every meaningful area of measurement over our record
results in 1996. Our accomplishments are extraordinary
in light of the cost associated with the continuing geographic
expansion of your Corporation.
Belmont Bancorp. continues to experience
double digit income growth. Net income for 1997
was a record $5,945,000 compared to $5,002,000
for 1996, an 18.9% increase. On an earning per
share basis this was $2.25 for 1997 versus $1.87
for the prior year.
As illustrated on the annual report cover, our
return to shareholders continues to be remarkable
compared to our peers and other notable stock market
indices. As of December 31, 1997, Belmont
Bancorp. common stock provided shareholders with
a 50.94% compounded annual return over the past
5 years. Had you invested $1,000 on December
31, 1992, and reinvested all dividends, your
$1,000 was worth $7,835.50 at year-end '97.
Also noteworthy was our return on average equity
and our return on average assets.
Return on average equity increased to 20.21%
from 19.55% in 1996.
Return on average assets increased to 1.62%
from 1.49% in 1996.
Total shareholders' equity for 1997 increased
16.7% to $31,899,000 from $27,332,000.
In 1997, our loan portfolio grew 19.1% to
$224,900,000 while maintaining excellent asset
quality. Nonperforming assets as a percentage
of total assets increased slightly to 0.41%
compared to 0.08% in 1996, while nonperforming
assets as a percentage of allowance for loan
losses was 38.20% versus 8.98% in the prior
year. Additionally, our allowance for possible
loan loss as a percentage of total loans
increased slightly to 1.84% from 1.67% in 1996.
Our 151st year of service to families,
businesses and communities was an exciting and
busy one. In May, we opened the Belmont
National Bank Solution Center...an innovative,
new approach to banking in the Ohio Valley.
Located at Plaza West, St. Clairsville, in front
of Riesbeck's, the Solution Center is much more
than just another banking office. The moment
you walk through the door, you'll experience a
different atmosphere. It's a place where
everyone is welcome and feels comfortable. It's
a place to spend time: reading in our
Investors' Lounge, doing independent research
linked to our web site and the internet,
attending a workshop on a variety of financial
topics, or simply relaxing with a cup of
cappuccino. There's even a kids' playroom for young
families with children. Our Solution Center
also features 24-hour drivein ATM service.
In September, we celebrated the opening of our
lucky 13th full service office. Located in the new
Imperial Plaza in Bellaire, Ohio, this office
features extended drive-in banking service from
8am til 7pm weekdays, Saturday hours, and 24-
hour drive-in ATM convenience. During the
year, we also added drive-in ATM service for
Ohio communities served by our Bridgeport and
Cadiz offices.
This annual report is dedicated to each and
every Belmont National Bank customer. We are grateful
for the opportunity to be your financial partner...to work
with you through your constantly changing needs in
your lifelong pursuit of financial well-being and
security. Our objective is to bring order and
expertise to the process of understanding and
evaluating the rapidly expanding and complex financial
services options you face throughout your life.
Belmont Bancorp. continues the tradition of being
one of the most outstanding financial institutions in
the country. That is a powerful statement for us to
make...but you do not need to take our word for it.
In May, we were once again honored by The Cleveland
Plain Dealer as one of Ohio's top 100 best-performing
companies. Then, in July, Belmont Bancorp. was rated
the 18th best-performing community bank in the entire
nation by the U.S. Banker magazine. In addition to
our financial statements, we have included in this
report highlights from an independent evaluation of
Belmont Bancorp. by McDonald & Company Securities Inc.
We extend our sincerest appreciation to all the
officers and staff of the Corporation, and the Board of
Directors whose dedication and hard work make Belmont
Bancorp. and Belmont National Bank one of the top
banking organizations in the country.
And, as always, we thank our shareholders across the
country who have shown confidence and trust in the
leadership of your Corporation. We pledge to you our
continuing best effort and look forward to providing
you with another prosperous year.
J. Vincent Ciroli, Jr.
Terrence A. Lee
An Independent Evaluation
By McDonald & Company Securities, Inc. Dated December 17, 1997
Belmont Bancorp. ranks among the upper tier of banks
in profitability and has shown strong earnings per
share growth over the last five years. Belmont
Bancorp. currently trades at 17.7 times its last
twelve months earnings and 331% of book, relative to
its peer group medians of 19.6x and 255%, respectively.
While Belmont Bancorp. operates in maturing markets,
loan growth has remained strong. For this reason, this
corporation's long term prospects for continued earnings
momentum are promising.
Profitability: Belmont Bancorp. has achieved strong
earnings and profitability improvement over the last
five years. The improvement is primarily a result of
strong loan growth, operating efficiencies and strong
non-interest income growth. Between 1992 and 1996,
the corporation's loan portfolio grew at a compound
average annual rate of 13%. Its composition changed
as well, with the proportion of commercial loans in
the portfolio increasing from 17% at year-end 1992 to
42% at year-end 1996. Net interest income benefitted
from the higher loan volumes and, with the help of
higher returns on its investment securities portfolio
after 1993, posted a compound average annual growth
rate of 19%. The corporation's net interest margin
increased from 3.44% in 1992 to 4.45% in 1996. Strong
revenue growth, as well as effective expense
management, had a positive effect on Belmont
Bancorp.'s efficiency ratio, which fell from 62% in
1992 to 49% in 1996. Non-interest income grew at a
compound average annual rate of 15%, with strong
increases in all categories. Of special note is the
significance of securities transactions to
profitability. In the course of managing interest
rate risk, Belmont Bancorp. shops around for pools of
low-risk securities that serve to mitigate interest
rate risk but that it perceives to be good value. If
the timing is right, Belmont Bancorp. will take
securities gains.
Overall balance sheet growth was modest, with assets
growing at a compound average annual rate of 6%
between 1992 and 1996. The corporation's double digit
loan growth was offset by declines in its investment
securities portfolio. At year-end 1992, loans
represented 46% of earning assets; by year-end 1996
that proportion increased to 67%. Deposits grew at a
compound average annual rate of under 2% during this
period, reflecting increased sources of competition.
The ratio of loans to deposits rose from 46% at
12/31/92 to 72% at 12/31/96.
For the quarter ended 9/30/97, earning per share
totalled $.54 compared to $.50 for the 9/30/96
quarter, and $.59 for the 6/30/97 quarter. The
improvement over the 9/30/96 quarter resulted from 8%
growth in net interest income and larger gains on
securities transactions. The change over the 6/30/97
quarter primarily reflected a change in accounting for
trust fees, a higher effective tax rate and higher non-
interest expenses. Belmont Bancorp.'s net interest
margin of 4.28% compared to 4.30% for the linked
quarter and 4.33% for the 9/30/96 quarter. Its
efficiency ratio improved to 47% from 48% in the
9/30/96 quarter. Asset, loan, and deposit growth from
the 9/30/96 quarter were 8%, 21%, and 5%, respectively.
Asset Quality: Asset quality ratios are strong. At
9/30/97, the ratio of nonperforming assets to total
assets was .32%. Reserve coverage of nonperforming
loans was 310%. The ratio of reserves to loans
exceeded 1.60% for the last two years and was 1.67% at
9/30/97. For the 9/30/97 quarter, annualized net
charge-offs were only .01% of average loans.
Capital: Belmont Bancorp. maintains a strong
capital position but not at the expense of shareholder
returns. At 9/30/97, its Tier 1 and Risk-Based
Capital ratios were 11.9% and 13.2%, respectively.
Dividends per share grew at a compound average annual
rate of 16.7% since 1992, and the dividend payout
ratio was 26% for fiscal 1996.
Recent Developments: During 1997, Belmont Bancorp.
opened new offices in Bellaire and St. Clairsville,
Ohio. A 25% stock dividend was paid on July 1, 1997.
Strengths:
Excellent Profitability: The corporation's earnings
and profitability ratios have shown excellent
improvement over the last five years, thanks to strong
loan growth and effective cost control management.
Its last twelve months' return on assets and return on
equity of 1.60% and 20.33% respectively, compare to
the national medians of 1.21% and 13.34%.
Strong Loan Growth: Over the last five years, Belmont
Bancorp.'s loan portfolio grew at a compound average
rate of 13%. Much of this growth consisted of
commercial loans extended to small manufacturing
businesses and to the amusement industry. Belmont
Bancorp. believes these two segments will continue to
positively impact loan growth.
Shareholder Commitment: Belmont Bancorp.'s commitment
to shareholder returns is evidenced not only by its
strong dividend growth rate but also its focus on
capital deployment to maximize return on equity.
Belmont Bancorp. will sacrifice net interest margin
and return on assets by leveraging capital if doing so
results in a higher return on equity.
Risk Factors:
Maturing Market: Belmont Bancorp.'s market area has
traditionally depended upon the steel and coal
industries, which have become less labor intensive
over the years. Prospects for growth in the region are
therefore limited. However, the area has experienced
somewhat of a rebound as a regional draw for retail
shopping.
Deposit Competition: Like all financial institutions,
Belmont Bancorp. faces intense competition for
attracting deposits. Deposits since 1992 have only
grown at a compound average annual growth rate of 2%.
As loan growth continues to outpace deposit growth,
the net interest margin will narrow. Belmont
Bancorp., however, generally believes that the
overhead and interest rate expense required to fight
for deposits makes the effort too costly. Borrowing
sources, such as the Federal Home Loan Bank, may be
the most cost effective means to fund future loan
growth.
Outlook: Belmont Bancorp. has been experimenting with
a more innovative retail delivery system at one of its
branches and plans to expand that to other branches in
the future. The company would like to expand
geographically, and will consider acquisition
opportunities as they arise.
The Return To Shareholders
The following graph and table compare, for each of the
last five years ending December 31, the cumulative
total return of Belmont Bancorp.'s Common Stock, SNL
Securities' Index of Banks with Assets Size less than
$500, Dow Jones Industrial Average, S & P 500, and all
NASDAQ U.S. Stocks Index. The cumulative total return
of the Corporation's Common Stock assumes $1,000
invested on December 31, 1992 and reinvestment of
dividends.
<TABLE>
<CAPTION>
Total Return Of A $1,000 Investment In Five Years
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Belmont Bancorp. $1,000 $1,093 $2,048 $3,831 $3,769 $7,836
All Banks <$500M Assets 1,000 1,306 1,404 1,921 2,472 4,215
Dow Jones Industrial 1,000 1,169 1,229 1,681 2,166 2,705
S & P 500 1,000 1,100 1,115 1,533 1,884 2,511
NASDAQ-Total US Stocks 1,000 1,148 1,122 1,587 1,952 2,395
</TABLE>
Belmont Bancorp. and Subsidiaries
Summarized Quarterly Financial Information
(Unaudited) ($000's except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1997
Interest income $6,528 $7,186 $7,337 $7,297
Interest expense 3,051 3,592 3,686 3,675
Net interest income 3,477 3,594 3,651 3,622
Provision for credit losses 105 250 200 500
Security gains 155 197 234 213
Net overhead 1,540 1,512 1,692 1,978
Income before income taxes 1,987 2,029 1,993 1,357
Income taxes 566 465 570 (180)
Net income $1,421 $1,564 $1,423 $1,537
Net income per common share $ 0.54 $ 0.59 $ 0.54 $ 0.58
1996
Interest income $6,150 $6,331 $6,576 $6,444
Interest expense 2,849 3,058 3,201 3,019
Net interest income 3,301 3,273 3,375 3,425
Provision for credit losses 150 105 105 105
Security gains 229 4 34 129
Net overhead 1,423 1,557 1,897 1,650
Income before income taxes 1,957 1,615 1,407 1,799
Income taxes 548 450 324 454
Net income $1,409 $1,165 $1,083 $1,345
Net income per common share $ 0.53 $ 0.43 $ 0.40 $ 0.51
1995
Net income $1,006 $1,098 $1,220 $ 882
Net earnings per common share $ 0.23 $ 0.30 $ 0.42 $ 0.24
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Five Year Summary of Operations
For the Years Ending December 31, 1997, 1996, 1995, 1994,
1993 (Unaudited) ($000's except per share data)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Interest income $ 28,348 $ 25,501 $ 23,454 $ 19,715 $ 16,789
Interest expense 14,004 12,127 10,927 8,807 8,616
Net interest income 14,344 13,374 12,527 10,908 8,173
Provision for credit losses 1,055 465 1,150 805 577
Net interest income after provision
for credit losses 13,289 12,909 11,377 10,103 7,596
Securities and trading gains (losses) 799 396 102 (63) 943
Other operating income 2,010 1,861 1,683 1,290 1,193
Operating expenses 8,732 8,388 7,623 7,069 6,757
Income before income taxes 7,366 6,778 5,539 4,261 2,975
Income taxes 1,421 1,776 1,333 1,027 406
Net income $ 5,945 $ 5,002 $ 4,206 $ 3,234 $ 2,569
Earnings per common share (1) $ 2.25 $ 1.87 $ 1.56 $ 1.19 $ 0.94
Cash dividend declared per share (1) $ 0.612 $ 0.480 $ 0.380 $ 0.302 $ 0.265
Book value per common share (1) $ 12.09 $ 10.34 $ 9.14 $ 7.27 $ 6.95
Total loans $224,900 $188,783 $159,957 $147,096 $125,232
Total assets 388,713 333,903 317,279 312,963 267,505
Total deposits 263,908 261,539 246,850 255,923 243,232
Total shareholders' equity 31,899 27,332 25,164 20,214 19,355
(1) Restated for stock dividends paid during 1994, 1995 and
1997.
</TABLE>
Belmont Bancorp. and Subsidiaries
Consolidated Balance Sheets
($000's)
December 31,
Assets 1997 1996
Cash and due from banks $ 10,265 $ 10,948
Federal funds sold - 24,450
Loans held for sale 884 242
Securities available for sale (at market value) 121,156 78,728
Securities held to maturity (market value of
$16,181 - 1997; and $19,302 - 1996) 15,955 19,299
Loans 224,016 188,541
Less allowance for possible loan losses (4,134) (3,153)
Net loans 219,882 185,388
Premises and equipment, net 7,401 7,260
Other real estate owned 20 66
Accrued income receivable 2,586 1,921
Other assets 10,564 5,601
Total assets $388,713 $333,903
Liabilities and Shareholders' Equity
Liabilities
Non-interest bearing deposits:
Demand $ 29,987 $ 29,232
Interest bearing deposits:
Demand 33,463 40,569
Savings 79,829 80,961
Time 120,629 110,777
Total deposits 263,908 261,539
Securities sold under repurchase agreements 5,256 8,280
Federal funds purchased and other short-term
borrowings 14,635 10,000
Long-term debt 69,635 19,676
Accrued interest on deposits and other borrowings 731 664
Other liabilities 2,649 6,412
Total liabilities 356,814 306,571
Shareholders' Equity
Preferred stock - authorized 90,000 shares with
no par value; issued and outstanding, none - -
Common stock - $0.50 par value, 8,900,000 shares
authorized, 2,644,163 issued 1,321 1,057
Surplus 7,781 7,781
Treasury stock (6,665 shares in 1997;
832 shares in 1996) (131) (8)
Retained earnings:
Unappropriated 21,879 17,820
Appropriated for contingencies 850 850
Net unrealized gain (loss) on securities
available for sale 199 (168)
Total shareholders' equity 31,899 27,332
Total liabilities and shareholders' equity $388,713 $333,903
The accompanying notes are an integral part of the
financial statements.
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31, 1997, 1996 and 1995
($000's)
Interest Income 1997 1996 1995
Loans and lease financing:
Taxable $ 19,141 $15,905 $ 13,924
Tax-exempt 334 329 288
Investment securities:
Taxable 7,238 7,660 7,638
Tax-exempt 1,284 1,251 1,424
Dividends 280 175 133
Interest on federal funds sold 71 181 47
Total interest income 28,348 25,501 23,454
Interest Expense
Deposits 10,063 9,386 9,022
Other borrowings 3,941 2,741 1,905
Total interest expense 14,004 12,127 10,927
Net interest income 14,344 13,374 12,527
Provision for Possible Loan Losses 1,055 465 1,150
Net interest income after provision
for possible loan losses 13,289 12,909 11,377
Non-lnterest Income
Trust fees 466 502 413
Service charges on deposits 707 660 555
Other operating income 837 699 715
Investment securities gains 799 396 102
Total non-interest income 2,809 2,257 1,785
Non-lnterest Expense
Salary and employee benefits 3,948 3,436 3,357
Net occupancy expense of premises 783 686 552
Equipment expenses 947 817 764
Other operating expenses 3,054 3,449 2,950
Total non-interest expense 8,732 8,388 7,623
Income before income taxes 7,366 6,778 5,539
Income Taxes 1,421 1,776 1,333
Net income $ 5,945 5,002 $ 4,206
Weighted-Average Number of Shares Outstanding 2,639,076 2,643,305 2,643,155
Earnings Per Common Share $ 2.25 1.87 $ 1.56
The accompanying notes are an integral part of the financial
statements.
Belmont Bancorp. and Subsidiaries
<TABLE>
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 1997, 1996 and 1995
($000's)
<CAPTION> Unrealized
Gain (Loss)
Retained Earnings on Securities
Preferred Common Unappro- Appro- Treasury Avaiable
Stock Stock Surplus priated priated Stock for Sale
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 1,000 $ 3,777 $5,061 $11,026 $ 850 $ (8) $(1,492)
Transfer to surplus resulting from
change in par value of
common stock - (3,248) 3,248 - - - -
Two-for-One stock split - 528 (528) - - - -
1995 Net income - - - 4,206 - - -
Cash dividends declared:
Preferred stock - - - (80) - - -
Common stock ($.380 per share) - - - (1,004) - - -
Change in unrealized gain (loss)-
securities available for sale - - - - - - 1,828
Balance, December 31,1995 $ 1,000 $ 1,057 $7,781 $14,148 $ 850 $ (8) $ 336
1996 Net income - - - 5,002 - - -
Cash dividends declared:
Preferred stock - - - (61) - - -
Common stock (per share $.480) - - - (1,269) - - -
Redemption of preferred stock (1,000) - - - - - -
Change in unrealized gain (loss)-
securities available for sale - - - - - - (504)
Balance, December 31, 1996 $ - $ 1,057 $7,781 $17,820 $ 850 $ (8) $ (168)
1997 net income - - - 5,945 - - -
Cash dividends declared:
Common stock (per share $.612) - - - (1,615) - - -
Five-for-four stock split effected
in the form of a stock dividend - 264 - (264) - - -
Cash paid in lieu-stock dividends - - - (7) - - -
Purchase of treasury stock - - - - - (123) -
Change in unrealized gain (loss)-
securities available for sale - - - - - - 367
Balance, December 31, 1997 $ - $ 1,321 $7,781 $21,879 $ 850 $(131) $ 199
</TABLE>
The accompanying notes are an integral part of the financial
statements.
Belmont Bancorp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995 ($000's)
Operating Activities: 1997 1996 1995
Net income $ 5,945 $ 5,002 $ 4,206
Adjustments to reconcile net income to net cash
flows provided by (used in) operating activities:
Provision for loan losses 1,055 465 1,150
Depreciation and amortization expense 818 674 601
Amortization of investment security premiums 1,278 1,469 1,123
Accretion of investment security discounts and
interest recorded on zero-coupon securities (230) (358) (305)
Investment securities losses 3 1 11
Gains on securities available for sale (802) (397) (113)
Loss (gain) on sale of fixed assets (1) 6 23
Gain on sale of loans (91) (72) (136)
Loss (gain) on sale of other real estate owned (7) 65 -
(Increase) decrease in interest receivable (665) 229 (17)
Increase in interest payable 67 3 71
Net increase in loans held for sale (642) (242) -
Others, net (6,546) 6,130 (65)
Net cash provided by operating activities 182 12,975 6,549
Investing Activities:
Net decrease (increase) in federal funds sold 24,450 (24,450) -
Proceeds from maturities and calls of investment
securities 3,575 1,859 12,154
Purchase of securities available for sale (164,305) (99,267) (106,839)
Purchase of investment securities - - (2,321)
Proceeds on sale of securities available for sale 105,407 110,808 85,414
Principal collected on mortgage-backed securities 16,545 22,930 19,405
Net increase in loans and leases, net of charge-offs (39,771) (38,514) (23,491)
Proceeds on sale of loans 13,361 9,874 10,816
Loans purchased (9,124) - (94)
Recoveries on loans previously charged-off 16 47 67
Proceeds from sale of other real estate owned 111 514 -
Purchase of life insurance contracts (2,365) - -
Purchase of premises and equipment (979) (2,859) (1,071)
Proceeds from sale of fixed assets 20 8 4
Net cash used in investing activities (53,059) (19,050) (5,956)
Financing Activities:
Net increase (decrease) in deposits 2,369 14,689 (9,073)
Net increase (decrease) in repurchase agreements (3,024) (6,259) 5,803
Net increase (decrease) in short-term borrowings 4,635 (14,126) (2,636)
Proceeds from the issuance of long-term debt 52,950 15,125 4,805
Payments on long-term debt (2,991) (251) (3)
Dividends paid on common and preferred stock (1,622) (1,330) (1,084)
Redemption of preferred stock - (1,000) -
Purchase of treasury stock (123) - -
Net cash provided by (used in) financing activities 52,194 6,848 (2,188)
Increase (Decrease) in Cash and Cash Equivalents (683) 773 (1,595)
Cash and Cash Equivalents, Beginning of Year 10,948 10,175 11,770
Cash and Cash Equivalents, End of Year $ 10,265 $ 10,948 $ 10,175
The accompanying notes are an integral part of the financial
statements.
Belmont Bancorp. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1997, 1996 and 1995 ($000's)
1. Summary of Significant Accounting Policies
The accounting and reporting policies and practices of
Belmont Bancorp. (the "Corporation") and its
subsidiaries are in accordance with
generally accepted accounting principles and
conform to general practices within the
banking industry. The more significant of
these policies and practices are summarized
below.
Nature of Operations: Belmont Bancorp.
provides a variety of banking services to
individuals and businesses through the branch
network of its wholly-owned subsidiary, Belmont
National Bank (BNB). BNB operates thirteen
full-service banking facilities located in
Belmont, Harrison, and Tuscarawas Counties in
Ohio, and Wheeling, West Virginia.
Principles of Consolidation: The
consolidated financial statements include the
accounts of Belmont Bancorp. and its wholly-
owned subsidiaries, Belmont National Bank and
Belmont Financial Network, Inc. Material
intercompany accounts and transactions have
been eliminated.
Use of Estimates: The preparation of
financial statements in conformity with
generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts
of assets and liabilities and disclosures of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could differ
from those estimates.
Held to Maturity Securities: These securities
are purchased with the original intent to hold to
maturity and events which may be reasonably
anticipated are considered when determining
the Corporation's intent and ability to hold to
maturity. Securities meeting such criteria
at date of purchase and as of the balance sheet date are
carried at cost, adjusted for amortization of premiums and
accretion of discounts.
Available for Sale Securities: Debt and equity
securities to be held for indefinite periods
of time and not intended to be held to maturity
are classified as available for sale and
carried at market value with net unrealized
gains and losses, net of tax, reflected as a
component of shareholders' equity until realized.
Securities held for indefinite periods of
time include securities that may be sold to meet
liquidity needs or in response to significant
changes in interest rates or prepayment risks as
part of the Corporation's overall asset/liability
management strategy.
Trading Securities: Trading securities are
held for resale within a short period of time
and are stated at market value. Trading gains
and losses include the net realized gain or loss
and market value adjustments of the trading account
portfolio.
Loans Held for Sale: Residential mortgage
loans which management does not intend to hold
to maturity or for which sales are pending are
reported as loans held for sale. Such loans are
carried at the lower of aggregate cost or
market.
Income Recognition: Income earned by the
Corporation and its subsidiaries is recognized
principally on the accrual basis of accounting.
Certain fees, principally service, are recognized
as income when billed. The subsidiary bank suspends
the accrual of interest when, in management's opinion, the
collection of all or a portion of interest has
become doubtful. Generally, when a loan is
placed on nonaccrual, the bank charges all previously
accrued and unpaid interest against income. In
future periods, interest will be included in
income to the extent received only if complete
principal recovery is reasonably assured.
The Corporation adopted the provisions of
Statement of Financial Accounting Standards No.
114 and No. 118, "Accounting for Creditors for
Impairment of a Loan." It is the Corporation's
policy not to recognize interest income on specific
impaired loans unless the likelihood of future loss is
remote. Interest payments received on such loans are
applied as a reduction of the loan principal
balance. Since the adoption of SFAS Nos. 114
and 118, the Corporation had no loans which
management has determined to be impaired.
The Corporation defers and amortizes loan fees
and related origination costs. These fees and
costs are amortized into interest or other
income over the estimated life of the loan using
a method which approximates the interest method.
Allowance For Loan Losses: The allowance for
loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit
losses inherent in the loan portfolio. The amount
of the allowance is based on management's evaluation
of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations,
trends in historical loss experience, specific
impaired loans, and economic conditions. Allowances for
impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. The
allowance is increased by a provision for loan losses, which
is charged to expense and reduced by chargeoffs, net of
recoveries. Changes in the allowance relating to impaired
loans are charged or credited to the provision for loan losses.
Because of uncertainties inherent in the estimation process,
management's estimate of credit losses inherent in the loan
portfolio and the related allowance may change in the near term.
Premises and Equipment: Premises and equipment
are stated at cost, less accumulated depreciation and
amortization. Provisions for depreciation and amortization
are computed generally using the straight line method over
the estimated useful lives of the assets. Leasehold
improvements are amortized on the straight line basis over
the lease period. When units of property are disposed of, the
premises and equipment accounts are relieved of the cost and the
accumulated depreciation related to such units. Any resulting
gains or losses are credited to or charged against income.
Costs of repairs and maintenance are charged to expense as
incurred. Major renewals and betterments are capitalized at
cost.
Other Real Estate: Real estate acquired in
satisfaction of indebtedness is recorded at
the lesser of the loan balance prior to
foreclosure, plus certain costs incurred
for improvements to the property, or fair value
less estimated selling costs of the property.
Earnings Per Common Share: Earnings per common
share are calculated based on net income
after preferred dividend requirements and the
weighted average number of shares of common
stock outstanding during the year. The
Corporation has no securities which would be
considered potential common stock. The
following is a reconciliation of net income to
income available to common shareholders in
computing basic earnings per share:
1997 1996 1995
(Expressed in Thousands)
Net income $5,945 $5,002 $4,206
Preferred stock dividends - (61) (80)
Income available to
common shareholders $5,945 $4,941 $4,126
Excess of Cost Over Net Assets Acquired: The
excess of cost over net assets of branches
purchased in 1991 is being amortized on the
straight line method over ten years.
The excess of cost over net assets of branches
purchased in 1992 is being amortized on the
straight line method over a five to eight year
period for the portion allocated to the core
deposit base and ten years for the remaining
excess. The unamortized balances at December 31,
1997 and 1996, were $677,000 and $1,092,000,
respectively. Amortization charged to expense was
$415,000 in each of the three years in the period ended
December 31, 1997.
Reclassifications: Certain prior year amounts
have been reclassified to conform with current
year presentation.
2. Shareholders' Equity
On February 21, 1995, the Corporation declared a
two-for-one stock split, which was effected in
the form of a 100% stock dividend to shareholders
of record on May 1, 1995, and paid on May 8, 1995.
On December 31, 1996, the Corporation redeemed
and retired all of the remaining outstanding
shares of its $100 par value, non-voting, senior
cumulative preferred stock. On June 16, 1997, the
Corporation declared a five-for-four stock split,
which was effected in the form of a 25% stock dividend to
shareholders of record on June 16, 1997, and paid on July 1,
1997. At various times during 1997, the Corporation
repurchased shares of its common stock in open market
transactions. The following table represents the change
in the Corporation's outstanding shares:
Preferred Common
Stock Stock
Shares outstanding, December 31, 1994 10,000 1,057,322
Two-for-one stock split - 1,057,322
Shares outstanding, December 31, 1995 10,000 2,114,644
Preferred stock redemption (10,000) -
Shares outstanding, December 31, 1996 - 2,114,644
25% stock dividend - 527,354
Shares repurchased - (4,500)
Shares outstanding, December 31, 1997 - 2,637,498
3. Investment Securities
The estimated market value of investment
securities are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury
securities and
obligations of
U.S. Government
corporations and
agencies $ 2,260 $ - $ (52) $ 2,208 $ 2,264 $ - $ (94) $ 2,170
Obligations of states
and political subdivisions 4,487 222 (13) 4,696 4,812 131 (58) 4,885
Mortgage-backed securities 9,208 119 (50) 9,277 12,223 121 (97) 12,247
Total held to maturity $ 15,955 $ 341 $(115) $ 16,181 $19,299 $ 252 $ (249) $19,302
Securities available for
sale:
U.S. Treasury
securities and
obligations of
U.S. Government
corporations and agencies $ 14,886 $ 16 $ (10) $ 14,892 $ 4,098 - $ (40) $ 4,058
Obligations of states and
political subdivisions 17,832 346 - 18,178 9,618 19 (93) 9,544
Mortgage derivative
securities 24,537 47 (153) 24,431 22,776 104 (477) 22,403
Mortgage-backed securities 58,897 341 (286) 58,952 39,223 412 (179) 39,456
Total debt securities 116,152 750 (449) 116,453 75,715 535 (789) 75,461
Equity securities 4,703 - - 4,703 3,267 - - 3,267
Total available for sale $120,855 $ 750 $(449) $121,156 $78,982 $ 535 $ (789) $78,728
</TABLE>
The amortized cost and estimated market value
of investment securities at December 31, 1997, by
contractual maturity, follow. Expected maturities
will differ from contractual maturities because
issuers may have the right to call or prepay
obligations with or without call or prepayment
penalties.
Securities Securities
Held to Maturity Available for Sale
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Due in one year or less $ 2,726 $ 2,667 $ 11,326 $ 11,333
Due after one year
through five years 1,714 1,780 3,667 3,667
Due after five years
through ten years 332 391 102 103
Due after ten years 1,975 2,065 17,623 17,968
Mortgage-backed securities 9,208 9,278 58,897 58,952
Mortgage derivative securities - - 24,537 24,430
Equity securities - - 4,703 4,703
Total $15,955 $16,181 $120,855 $121,156
The mortgage derivative securities consist
solely of collateralized mortgage obligations
(CMO), including one principal-only CMO with
a book value of $105,000 and $169,000 at
December 31, 1997 and 1996, respectively and an
estimated fair value of $86,000 and $126,000 at
December 31, 1997 and 1996, respectively.
Securities held to maturity include a
U.S. Government Agency structured note with a
carrying value of $2,260,000 and $2,264,000 at
December 31, 1997 and 1996, respectively, and
an estimated fair value of $2,170,000 at both
December 31, 1997 and 1996.
At December 31, 1997, securities available for sale
include a U.S. Government Agency structured note with
a carrying value of $3,567,000 and an estimated
fair value of $3,566,000.
Sales and write-downs of investment securities
resulted in the following:
1997 1996 1995
Proceeds from sales $105,407 $110,808 $85,414
Gross gains 869 745 464
Gross losses (67) (346) (352)
Losses on securities called (3) (3) (26)
Gains on securities called - - 16
All securities sold were classified as available
for sale at the time of sale. There were no
transfers of securities between classifications
in 1997 or 1996. In accordance with guidance
issued by the Financial Accounting Standards
Board, the Corporation reassessed the
appropriateness of the classifications of all
securities in December, 1995. As a result,
securities with an amortized cost of $56,490,000
and unrealized loss of $95,000 were transferred
from the held to maturity category to the
available for sale category at that time.
Assets carried at $29,526,000 and $26,724,000
at December 31, 1997 and 1996, respectively,
were pledged to secure United States Government
and other public funds, and for other purposes as
required or permitted by law.
4. Loans and Allowance for Possible Loan Losses
Loans outstanding at December 31 are as
follows:
1997 1996
Real estate-construction $ 1,418 $ 1,327
Real estate-mortgage 77,111 71,473
Real estate-secured by nonfarm,
nonresidential property 19,983 25,954
Commercial, financial and agricultural 106,443 76,035
Obligations of political subdivisions in the U.S 3,175 4,519
Installment and credit card loans to individuals 15,886 9,233
Loans receivable $224,016 $188,541
Mortgage loans serviced for others approximated
$31,301,000 and $21,047,000 at December 31,1997
and 1996, respectfully.
The bank discontinues accruing interest income on loans
and leases when, in the opinion of management, the
collectibility of such interest appears doubtful.
Nonaccruing loans and leases amounted to $1,515,000 and
$143,000 at December 31, 1997 and 1996, respectively.
The after-tax effect of the interest that would have
been accrued on these loans was $46,000 in 1997 and
$7,000 in 1996.
The following is an analysis of loan activity to directors,
executive officers, and their associates (see Note 13):
1997 1996
Balance previously reported $7,812 $6,800
New loans during the year 1,857 2,760
Total 9,669 9,560
Less repayments during the year 2,909 1,748
Balance, December 31 $6,760 $7,812
Activity in the allowance for loan losses is
summarized as follows:
December 31
1997 1996 1995
Balance at beginning of year $3,153 $2,703 $1,537
Additions charged to operating expense 1,055 465 1,150
Recoveries on loans previously
charged-off 17 47 67
Total 4,225 3,215 2,754
Loans charged-off 91 62 51
Balance at end of year $4,134 $3,153 $2,703
The entire allowance represents a valuation reserve
which is available for future charge-offs.
5. Premises and Equipment
Premises and equipment are stated at cost less
accumulated depreciation and amortization, as
follows:
Original
December 31 Useful Life
1997 1996 Years
Land and land improvements $ 1,225 $ 1,161
Buildings 5,874 5,546 30 - 50
Furniture, fixtures and equipment 5,456 4,890 5 - 12
Leasehold improvements 377 377 5 - 20
Total 12,932 11,974
Less accumulated depreciation
and amortization 5,531 4,714
Premises and equipment, net $ 7,401 $ 7,260
Charges to operations for depreciation and
amortization approximate $818,000, $674,000, and
$601,000 for 1997, 1996, and 1995, respectively.
6. Deposits
The distribution of the bank's deposits at
December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
Non- Non-
interest interest
Bearing Interest Bearing Bearing Interest Bearing
Demand Demand Savings Time Demand Demand Savings Time
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individuals, partnerships
and Corporations $20,818 $33,463 $79,829 $112,190 $13,020 $40,569 $80,961 $105,878
U.S. Government 44 - - - 285 - - -
States and political
subdivisions 7,016 - - 8,439 14,705 - - 4,899
Other depository
institutions in the U.S. - - - - - - - -
Certified, officers' checks,
travelers cheques, etc. 2,109 - - - 1,222 - - -
Total $29,987 $33,463 $79,829 $120,629 $29,232 $40,569 $80,961 $110,777
</TABLE>
Time deposits include certificates of deposit issued in
denominations of $100,000 or more which amounted to
$17,716,000 at December 31, 1997, and $13,133,000 at
December 31, 1996. A maturity distribution of time
certificates of deposit of $100,000 or more follows:
1997 1996
Due in three months or less $ 5,966 $ 3,247
Due after three months through six months 4,093 2,125
Due after six months through twelve months 4,526 4,667
Due after one year through five years 1,996 2,074
Due after five years 1,135 1,020
Total $17,716 $13,133
7. Securities Sold Under Repurchase Agreements
Securities sold under agreements to repurchase
represent primarily overnight borrowings.
However, as of December 31, 1997, BNB had two
repurchase agreements outstanding with maturities
of three months. For all repurchase agreements,
the securities underlying the agreements were under
BNB's control. Information related to these
borrowings is summarized below:
1997 1996 1995
Balance at year-end $5,256 $ 8,280 $14,539
Average during the year $7,116 $11,529 $17,669
Maximum month-end balance $8,847 $21,362 $24,012
Weighted average rate during the year 5.66% 4.86% 4.82%
Weighted average rate at December 31 6.39% 5.55% 3.05%
At December 31, 1997, BNB also had available
additional credit totaling $70 million under a
repurchase agreement-based cash management
advance agreement, all of which was unused.
This agreement will expire on June 5, 1998.
8. Short-Term Borrowings
Short-term borrowings consist of advances from
the Federal Home Loan Bank of Cincinnati
(FHLB) and federal funds purchased. These
represent primarily overnight borrowings. FHLB
advances are made under agreements which
allow for maximum borrowings of $30 million.
Advances can be made at fixed or variable
rates of interest. Collateral for the advances
consists of residential mortgage loans and shares
of stock of the Federal Home Loan Bank of Cincinnati.
Information related to these borrowings at December 31,
1997 and 1996, is summarized below:
FHLB Advances 1997 1996
Balance at year-end $ 8,829 $10,000
Average balance during the year $17,648 $11,222
Maximum month-end balance $49,209 $27,352
Weighted average rate during the year 5.66% 5.59%
Interest rate at December 31 6.90% 5.45%
Collateral:
Residential mortgage loans $13,244 $15,000
Federal Home Loan Bank stock $ 4,450 $ 2,959
Federal Funds Purchased 1997 1996
Balance at year-end $ 5,806 $ -
Average during the year $ 953 $ 1,132
Maximum month-end balance $ 7,000 $ 5,338
Weighted average rate during year 5.93% 5.61%
Weighted average rate at December 31 6.76% 0.00%
9. Long-Term Debt
Long-term debt consists of advances from the
Federal Home Loan Bank of Cincinnati. Fixed-
rate, single payment loans totaling $62,000,000
and $14,000,000 at December 31, 1997 and 1996,
respectively, mature in 1998 through 2007 with
interest rates ranging from 5.09% to 6.56%.
Fixed-rate, amortizing loans totaling $7,635,000
and $5,676,000 at December 31, 1997 and 1996,
respectively, reach final maturity in years
1998 through 2017, with interest rates ranging
from 5.50% to 6.95%. The loans are secured
by residential mortgage loans with a carrying value
of $63,151,000 and $29,514,000 at December 31, 1997
and 1996, respectively, Federal Home Loan Bank Stock,
and investment securities with a carrying value of
$39,877,000 and $19,055,000 at December 31, 1997 and
1996, respectively.
Scheduled principal payments on long-term debt
in each of the five years subsequent to
December 31, 1997, are as follows:
1998 $12,746
1999 $ 794
2000 $10,783
2001 $ 833
2002 $ 314
Thereafter $44,165
10. Income Tax
The components of applicable income taxes are
as follows:
1997 1996 1995
Currently payable $1,710 $1,910 $1,726
Deferred (289) (134) (393)
Income tax $1,421 $1,776 $1,333
The following temporary differences gave rise to the deferred
tax asset at December 31, 1997 and 1996:
1997 1996
Allowance for loan losses $1,256 $ 923
Interest on non-accrual loans 24 4
Unrealized (gains) losses on investments (94) 105
Deferred loan origination fees 11 11
Deferred compensation and liability
for future employees benefits 228 85
Intangible assets 301 283
Premises and equipment due to
differences in depreciation (156) (132)
Direct finance leases (86) (86)
Federal Home Loan Bank
stock dividends (235) (141)
Total deferred tax assets $1,249 $1,052
A reconciliation between the amount of reported
income tax expense and the amount computed by applying
the statutory federal income tax rate to income
before income taxes is as follows:
1997 1996 1995
Amount Percent Amount Percent Amount Percent
Tax at statutory rate $2,504 34.0 $2,305 34.0 $1,883 34.0
Reductions in taxes
resulting from:
Tax exempt interest
on investments
and loans (550) (7.5) (537) (7.9) (582) (10.5)
Tax credits (482) (6.5) - - - -
Excess of tax loss over
book gains on
investment securities (33) (0.4) (37) (0.6) (22) (0.4)
Earnings on life
insurance policies (43) (0.6) (39) (0.6) (33) (0.6)
Non-deductible
interest expense 68 0.9 78 1.2 75 1.4
Others - net (43) (0.6) 6 0.1 12 0.2
Actual tax expense $1,421 19.3 $1,776 26.2 $1,333 24.1
The bank has available $494,000 in capital loss
carryforwards which will expire in 1998.
11. Employee Benefit Plans
The Corporation has a profit-sharing retirement
plan which includes all full-time employees who
have reached the age of twenty-one and have
completed at least one year of service. Each
participant can elect to contribute to the
plan an amount not to exceed 10% of their
salary. The plan provides for an employer
matching contribution on the first 4% of the
participant's elective contribution. In
addition to the matching contribution, the
plan provides for a discretionary contribution
to be determined by the bank's Board of
Directors.
Total pension expense for 1997, 1996, and 1995
was $277,000, $234,000, and $242,000,
respectively.
In addition to providing the profit-sharing
plan, Belmont Bancorp. sponsors two defined
benefit postretirement plans that cover
both salaried and nonsalaried employees.
Employees must be fifty-five years old and have
ten years of service to qualify for both
plans. One plan provides medical and
dental benefits, and the other provides life
insurance benefits. The postretirement health
care plan is contributory, with retiree
contributions adjusted annually; the life
insurance plan is noncontributory. On January
1, 1993, Belmont Bancorp. adopted Statement
of Financial Accounting Standards ("SFAS")
No. 106, "Employer's Accounting for Postretirement
Benefits Other than Pensions." The statement requires
the accrual of the expected cost of providing
postretirement benefits to employees and
certain dependents during the years that an
employee renders service.
The following table sets forth the plan's
combined funded status reconciled with the
amount shown in the Corporation's balance sheet
at December 31:
1997 1996
Accumulated post-retirement benefit obligation:
Retirees $ 39 $ 44
Active plan participants 49 84
88 128
Plan assets at fair value - -
Accumulated post-retirement benefit
obligation in excess of plan assets 88 128
Unrecognized net gain (loss) from past
experience different from that
assumed and from changes in assumptions 56 6
Prior service cost not yet recognized
in expense 2 14
Accrued post-retirement benefit cost in the
balance sheet $146 $148
The Corporation's postretirement health care
plan is under funded. The accumulated
postretirement benefit obligation and plan
assets for that plan are $88,000 and $-0-,
respectively, at December 31, 1997, and
$128,000 and $-0-, respectively, at December 31, 1996.
Postretirement expense includes the following
components:
1997 1996 1995
Service cost $ 5 $ 6 $ 4
Interest cost on accumulated
post-retirement benefit obligation 9 10 10
Net amortization and deferral (12) (10) (11)
Post-retirement expense $ 2 $ 6 $ 3
The annual assumed rate of increase in the per
capita cost of covered benefits for 1998 and
1997 is 11.0% for medical benefits and 8.5%
for dental benefits. The rates are assumed
to decrease gradually to 5.5% (for medical in
2006 and for dental in 2004), and remain at
that level thereafter. Increasing the assumed
health care trend rates by one percentage point
in each year would have an immaterial effect on
the accumulated postretirement benefit obligation
and the aggregate of the service and interest cost
components of the net periodic postretirement
benefit cost. The weighted-average discount rate
used in determining the accumulated postretirement
benefit obligation was 7%. The long-term inflation
rate assumed was 4%.
12. Leases
The subsidiary bank utilized certain bank
premises and equipment under long-term leases
expiring at various dates. In certain cases,
these leases contain renewal options and
generally provide that the Corporation will
pay for insurance, taxes and maintenance.
As of December 31, 1997, the future minimum
rental payments required under noncancelable
operating leases with initial terms in excess
of one year are as follows:
Operating Leases
Year ending December 31,
1998 $ 81
1999 64
2000 64
2001 65
2002 67
Thereafter 274
Total minimum lease payments $615
Rental expense under operating leases approximated
$132,000 in 1997, $129,000 in 1996, and $86,000 in 1995.
13. Related Party Transactions
Certain directors and executive officers
and their associates were customers of, and
had other transactions with, the subsidiary
bank in the ordinary course of business in 1997
and 1996. The outstanding balance of all loans
to the related parties was $6,760,000 and
$7,812,000 at December 31, 1997 and 1996,
respectively. All loans and commitments included in
such transactions were made on substantially the
same terms, including interest rates and collateral,
as those prevailing at the time for comparable
transactions with others and did not involve more
than the normal risk of collectibility or present
other unfavorable features.
14. Commitments and Contingencies
The subsidiary bank is a party to financial
instruments with off-balance-sheet risk in the
normal course of business to meet the
financing needs of its customers. These
financial instruments include commitments to
extend credit and standby letters of credit.
These instruments involve, to varying degrees,
elements of credit risk in excess of the amount
recognized in the balance sheet. The contract
amounts of those instruments reflect the extent
of involvement the Corporation has in particular
classes of financial instruments.
The Corporation's exposure to credit loss in
the event of nonperformance by the other
party to the financial instrument for
commitments to extend credit and standby
letters of credit is represented by the
contractual amount of those instruments. The
Corporation uses the same credit policies in
making commitments and conditional obligations
as it does for on-balance-sheet instruments.
The following represents financial instruments
whose contract amounts represent credit risk at
December 31:
Contract Amount
1997 1996
Commitments to extend credit $27,081 $20,827
Standby letters of credit 1,449 859
Commitments to purchase
when-issued securities - 5,500
Commitments to extend credit are agreements to
lend to a customer as long as there is no
violation of any condition established in the
contract. Commitments generally have fixed
expiration dates or other termination clauses
and may require payment of a fee. Since many
of the commitments are expected to expire
without being drawn upon, the total commitment
amounts do not necessarily represent future cash
requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the
Corporation upon extension of credit, is based on
management's credit evaluation of the counter party.
Collateral held varies but may include accounts receivable,
inventory, property, plant, and equipment, and income-
producing properties.
Standby letters of credit are conditional
commitments issued by the Corporation to
guarantee the performance of a customer to
a third party. Those guarantees are primarily
issued to support public and private borrowing
arrangements. Of the standby letters of credit,
$880,000 expire in 1998, while the remaining
$569,000 expire in various years through 2002.
The credit risk involved in issuing letters of
credit is essentially the same as that involved
in extending loan facilities to customers.
In the ordinary course of business, the
Corporation and its subsidiaries have been named
as defendants in legal actions. Management
believes, based on the advice of counsel, that
liabilities, if any, arising from these actions
will not be material to the Corporation's
financial position or results of operations.
15. Concentrations of Credit Risk
The subsidiary bank extends commercial,
consumer, and real estate loans to customers
primarily located in Belmont, Harrison, and
Tuscarawas Counties in Ohio and Ohio County,
West Virginia. While the loan portfolios are
diversified, the ability of the borrowers to
meet their contractual obligations partially
depends upon the general economic condition
of Southeastern Ohio and the Northern Panhandle
of West Virginia.
At December 31, 1997, there were approximately
$21,600,000 in loans to businesses that
operated in the outdoor amusement industry or
manufactured equipment for use in this industry.
These loans represent 9.6% of total loans.
Approximately one-half of these loans are
to borrowers located in the State of Ohio.
The remaining businesses operate throughout the
continental United States. There were no other
significant concentrations.
16. Limitations on Dividends
The approval of the Comptroller of the Currency
is required to pay dividends if the total of all
dividends declared by a national bank in any
calendar year exceeds the total of its retained
net profits of the preceding two years. Under
this formula, the bank can declare dividends
in 1998 without approval of the Comptroller of
the Currency of approximately $8,200,000 plus an
additional amount equal to the bank's net profit
for 1998 up to the date of any such dividend declaration.
The subsidiary bank is the primary source of funds to pay
dividends to the shareholders of Belmont Bancorp.
17. Other Operating Expenses
Other operating expenses include the following:
1997 1996 1995
Taxes other than payroll
and real estate $ 426 $ 395 $ 287
Supplies and printing 280 301 295
Insurance, including
Federal Deposit Insurance 125 567 430
Amortization of intangibles 415 415 415
Other (individually less than
1% of total interest income) 1,808 1,771 1,523
Total $3,054 $3,449 $2,950
18. Restrictions on Cash
The subsidiary bank is required to maintain
an average reserve balance with the Federal
Reserve Bank. The average amounts of the
reserve balance for the years ended December 31,
1997 and 1996, were $3,987,000 and $3,095,000,
respectively.
19. Cash Flows Information
The Corporation's policy is to include cash
on hand and amounts due from banks in the
definition of cash and cash equivalents.
Cash payment for interest in 1997, 1996, and
1995 were $13,937,000, $12,124,000 and
$10,856,000, respectively. Cash payments for
income taxes for 1997, 1996, and 1995, were
$2,074,000, $1,733,000, and $1,740,000,
respectively.
20. Regulatory Matters
The subsidiary bank is subject to various
regulatory capital requirements administered by
the federal banking agencies. Failure to meet
minimum capital requirements can initiate
certain mandatory, and possibly additional
discretionary, actions by regulators that, if
undertaken, could have a direct material
effect on the bank's financial statements.
Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the
bank must meet specific capital guidelines
that involve quantitative measures of the
bank's assets, liabilities, and certain off
balance-sheet items as calculated under regulatory
accounting practices. The bank's capital
amounts and classifications are also subject to
qualitative judgments by the regulators about
components, risk, weighting, and other factors.
Quantitative measures established by regulation
to ensure capital adequacy require the bank
to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined).
Management believes, as of December 31, 1997, that the
bank meets all capital adequacy requirements to which
they are subject.
As of December 31, 1997, the most recent
notifications from the Office of the
Comptroller of the Currency categorized the
bank as well capitalized under the regulatory
framework for prompt corrective action. To be
categorized as well capitalized, the bank
must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or
events since those notifications that management
believes have changed the institution's category.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital $33,614 12.9% $20,912 8.0% $26,141 10.0%
(to Risk Weighted Assets)
Tier I Capital $30,336 11.6% $10,456 4.0% $15,684 6.0%
(to Risk Weighted Assets)
Tier I Capital $30,336 8.1% $14,962 4.0% $18,702 5.0%
(to Average Assets)
As of December 31, 1996:
Total Capital $28,368 13.4% $16,917 8.0% $21,146 10.0%
(to Risk Weighted Assets)
Tier I Capital $25,718 12.2% $ 8,458 4.0% $12,687 6.0%
(to Risk Weighted Assets)
Tier I Capital $25,718 7.7% $13,357 4.0% $16,696 5.0%
(to Average Assets)
</TABLE>
21. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial
Instruments", requires disclosure of fair value
information about financial instruments, whether or
not recognized in the balance sheet. In cases
where quoted market prices are not available,
fair values are based on estimates using
present value or other valuation techniques.
Those techniques are significantly affected by
the assumptions used, including the discount
rate and estimates of future cash flows. In
that regard, the derived fair value estimates
cannot be substantiated by comparison to
independent markets and, in many cases, could not
be realized in immediate settlements of the instruments.
Statement 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure
requirements. In addition, the value oflong term
relationships with depositors and other customers is not
reflected. The value of these items is significant.
Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Corporation.
The following methods and assumptions were
used in estimating fair values of financial
instruments as disclosed herein:
Cash and Cash Equivalents: For those short-term
instruments, the carrying amount is a reasonable
estimate of fair value.
Investment Securities and Securities Held for
Sale: For debt securities, derivative
instruments and marketable equity securities
held for investment purposes and for sale, fair
values are based on quoted market prices or
dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted
market prices for similar securities.
Loans: For certain homogeneous categories of
loans, such as some residential mortgages, fair
value is estimated using the quoted market
prices for securities backed by similar loans.
The fair value of other types of loans is
estimated by discounting the future cash flows
using the current rates at which similar loans
would be made to borrowers with similar credit
ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand
deposits, savings accounts, and certain money
market deposits is the amount payable on
demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is
estimated using the rates currently offered for
deposits of similar remaining maturities.
Short-Term Borrowings: These liabilities
represent primarily overnight borrowings and
debt maturing within ninety days of issuance
with interest rates adjusted weekly. Accordingly,
the carrying amount is a reasonable estimate of
fair value.
Long-Term Debt: The fair values of long-term
debt are estimated using discounted cash flow
analyses based on the Corporation's current
incremental borrowing rates for similar
types of borrowing arrangements.
The estimated fair values as of December 31 for
the Corporation's financial instruments are as follows:
1997 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Financial assets:
Cash and federal funds sold $ 10,265 $ 10,265 $ 35,398 $ 35,398
Securities available for sale 121,156 121,156 78,728 78,728
Securities held to maturity 15,955 16,181 19,299 19,302
Loans, net 220,766 225,678 185,630 188,755
Financial liabilities:
Deposits 263,908 264,413 261,539 261,602
Repurchase agreements 5,256 5,256 8,280 8,280
Short-term borrowings 14,635 14,635 10,000 10,000
Long-term debt 69,635 60,857 19,676 17,808
22. Condensed Parent Company Financial Statements
Presented below are the condensed balance
sheets, statements of income, and statements of
cash flows for Belmont Bancorp.
Balance Sheets
December 31,
1997 1996
Assets
Cash $ 227 $ 101
Investment in subsidiaries
(at equity in net assets) 30,611 26,535
Equity securities 66 120
Advances to subsidiaries, net 1,068 429
Prepaid taxes 247 4
Other assets 565 422
Total Assets $32,784 $27,611
Liabilities
Payable to subsidiary $ 485 $ -
Accrued taxes - 23
Deferred compensation 400 256
Total liabilities 885 279
Shareholders' Equity
Preferred stock - -
Common stock 1,321 1,057
Capital surplus 7,781 7,781
Treasury stock-6,665 and 832 shares,
respectively (131) (8)
Retained earnings-appropriated 850 850
Retained earnings-unappropriated 21,879 17,820
Net unrealized gain (loss) on
securities available for sale 199 (168)
Total shareholders' equity 31,899 27,332
Total Liabilities and Shareholders'
Equity $32,784 $27,611
Statements of Income
1997 1996 1995
Operating Income
Dividends from subsidiaries $2,207 $2,479 $1,084
Gain on sale of securities 126 - -
Other income 27 19 10
Total income 2,360 2,498 1,094
Operating Expenses (113) (67) (59)
Income before income tax
and equity in undistributed
income of subsidiaries 2,247 2,431 1,035
Income Tax (Credit) 12 (18) (18)
Equity in Undistributed Income
of Subsidiaries 3,710 2,553 3,153
Net Income $5,945 $5,002 $4,206
Statements of Cash Flows
1997 1996 1995
Operating Activities
Net income $ 5,945 $ 5,002 $ 4,206
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of securities (126) - -
Undistributed earnings of affiliates (3,710) (2,553) (3,153)
Changes in operating assets and liabilities:
Prepaid expenses (242) 153 (10)
Accrued expenses and dividends 121 259 -
Other assets (143) (422) -
Net cash provided by
operating activities 1,845 2,439 1,043
Investing Activities
Proceeds from sale of securities 180 - -
Payments to subsidiaries (154) (31) (253)
Investment purchases - - (60)
Net cash provided by (used
in) investing
activities 26 (31) (313)
Financing Activities
Cash paid for fractional shares (7) - -
Purchase of treasury stock (123) - -
Redemption of preferred stock - (1,000) -
Dividends (1,615) (1,330) (1,084)
Net cash used in
financing activities (1,745) (2,330) (1,084)
Increase (Decrease)in Cash & Cash
Equivalents 126 78 (354)
Cash and Cash Equivalents at Beginning
of Year 101 23 377
Cash and Cash Equivalents at End of Year $ 227 $ 101 $ 23
Supplemental disclosures:
The Corporation made income tax payments of
$2,074,000, $1,733,000, and $1,740,000, in 1997, 1996,
and 1995, respectively. These payments represented
income tax payments for the Corporation and its
consolidated subsidiaries.
The Corporation incurred no interest expense in
1997, 1996 or 1995.
<PAGE>
Board of Directors
Belmont Bancorp.
St. Clairsville, Ohio
We have audited the accompanying consolidated
balance sheets of Belmont Bancorp. and
subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of
income, changes in shareholders' equity, and
cash flows, for each of the three years in the
period ended December 31, 1997.
These financial statements are the responsibility
of the Corporation's management. Our responsibility
is to express an opinion on these financial statements
based on our audits. We conducted our audits in
accordance with generally accepted auditing
standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts
and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made
by management, as well as evaluating the overall
financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the consolidated financial
position of Belmont Bancorp. and subsidiaries
at December 31, 1997 and 1996, and the
consolidated results of its operations,
changes in shareholders' equity, and cash
flows, for each of the three years in the
period ended December 31, 1997, in conformity
with generally accepted accounting principles.
S. R. Snodgrass A. C.
Wheeling, West Virginia January 23, 1998
<PAGE>
Belmont Bancorp. and Subsidiaries
Report on Management's Responsibilities
Management of Belmont Bancorp. is
responsible for the accurate and objective
preparation of the consolidated financial
statements and the estimates and judgements
upon which certain financial statements are
based. Management is also responsible for
preparing the other financial information
included in this annual report. In our opinion,
the financial statements on the preceding pages
have been prepared in conformity with generally
accepted accounting principles and other financial
information in this annual report is consistent
with the financial statements.
Management is also responsible for establishing and
maintaining an adequate internal control system which
encompasses policies, procedures and controls directly
related to, and designed to provide reasonable assurance
as to the integrity and reliability of the financial
reporting process and the financial statements generated
therefrom. The concept of reasonable assurance is based
on the recognition that there are inherent limitations in
all systems of internal control, and that the cost of such
systems should not exceed the benefits to be derived therefrom.
The systems and controls and compliance therewith are reviewed
by an extensive program of internal audits and by our independent
auditors. Their activities are coordinated to obtain maximum
audit coverage with a minimum of duplicate effort and cost. The
independent auditors have access to all internal audit work
papers. Management believes the system of internal control
effectively meets its objectives of reliable financial reporting.
The Board of Directors pursues its responsibility for the
quality of the Corporation's financial reporting primarily
through its Audit Committee which is comprised solely of
outside directors. The Audit Committee meets regularly with
management, the contract internal auditor and independent
auditors to ensure that each is meeting its responsibilities
and to discuss matters concerning internal controls, accounting
and financial reporting. The contract internal auditor and
independent auditors have full and free access to the Audit
Committee.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
Belmont Bancorp.
Belmont National Bank
William Wallace
Executive Vice President and
Chief Operating Officer
Belmont National Bank
Jane R. Marsh
Secretary, Belmont Bancorp.
Senior Vice President, Controller and Cashier
Belmont National Bank
<PAGE>
Belmont Bancorp. and Subsidiaries
Consolidated Average Balance Sheets
For the Years Ended December 31, 1997, 1996 and 1995 (Fully
Taxable Equivalent Basis) (000's)
<TABLE>
<CAPTION>
1997 1996 1995
Average Average Average Average Average Average
Out- Revenue/ Yield/ Out- Revenue/ Yield/ Out- Revenue/ Yield/
standing Cost Rate standing Cost Rate standing Cost Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets
Loans and leases $208,265 $19,632 9.43% $174,445 $16,389 9.39% $152,502 $14,347 9.41%
Securities
Taxable 110,739 7,515 6.79% 115,070 7,828 6.80% 113,409 7,768 6.85%
Exempt from income tax 24,728 1,861 7.53% 23,403 1,802 7.70% 25,689 2,062 8.03%
Federal funds sold 1,317 71 5.39% 3,409 181 5.31% 805 47 5.84%
Total interest earning assets 345,049 29,079 8.43% 316,327 26,200 8.28% 292,405 24,224 8.28%
Cash and due from banks 10,267 9,328 8,448
Other assets 15,648 14,229 12,927
Market value appreciation
(depreciation) of securities
available for sale (546) (767) (731)
Allowance for possible loan
loss (3,461) (2,928) (2,139)
Total Assets $366,957 $336,189 $310,910
Liabilities
Interest bearing liabilities
Interest checking $ 43,476 1,444 3.32% $ 38,576 $ 1,225 3.18% $ 25,953 $ 614 2.37%
Savings 78,636 2,474 3.15% 79,341 2,423 3.05% 78,679 2,359 3.00%
Other time deposits 115,304 6,145 5.33% 111,657 5,738 5.14% 121,329 6,049 4.99%
Other borrowings 68,095 3,941 5.79% 50,274 2,741 5.45% 34,665 1,905 5.50%
Total interest bearing
liabilities 305,511 14,004 4.58% 279,848 12,127 4.33% 260,626 10,927 4.19%
Demand deposits 29,878 27,878 25,819
Other liabilities 2,146 2,199 1,632
Total liabilities 337,535 309,925 288,077
Shareholders' Equity 29,422 26,264 22,833
Total Liabilities and
Shareholders' Equity $366,957 $336,189 $310,910
Net interest income margin
on a taxable equivalent basis 15,075 4.37% 14,073 4.45% 13,297 4.55%
Net interest rate spread 3.84% 3.95% 4.09%
Interest bearing liabilities to
interest earning assets 88.54% 88.47% 89.13%
</TABLE>
Fully taxable equivalent basis computed at effective federal
tax rate of 34%.
Average loan balances include nonperforming loans.
<PAGE>
Belmont Bancorp. and Subsidiaries
Analysis of Net Interest Income Changes
For the Years Ended December 31, 1997, 1996 and 1995 (Fully
Taxable Equivalent Basis) (000's)
<TABLE>
<CAPTION>
1997 Compared to 1996 1996 Compared to 1995
Volume Yield Mix Total Volume Yield Mix Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in interest income
Loans and leases $3,177 $ 55 $ 12 $3,244 $2,064 $ (20) $ (2) $2,042
Securities
Taxable (295) (19) - (314) 114 (53) (1) 60
Exempt from income taxes 102 (41) (2) 59 (183) (84) 7 (260)
Federal funds sold (111) 3 (2) (110) 152 (4) (14) 134
Total interest income change 2,873 (2) 8 2,879 2,147 (161) (10) 1,976
Increase (decrease) in
interest expense
Interest checking 156 56 8 220 299 210 102 611
Savings (22) 73 (1) 50 20 44 - 64
Other time deposits 187 213 7 407 (482) 186 (15) (311)
Short-term borrowings 972 169 59 1,200 858 (15) (7) 836
Total interest expense
change 1,293 511 73 1,877 695 425 80 1,200
Increase (decrease) in net
interest
income on a taxable equivalent
basis $1,580 $(513) $(65) $1,002 $1,452 $(586) $(90) $ 776
(Increase) decrease in taxable
equivalent adjustment (32) 71
Net interest income change $ 970 $ 847
</TABLE>
<PAGE>
Belmont Bancorp. Directors
John A. Belot
President, Walden Industries, Inc.
J. Vincent Ciroli, Jr.
President and Chief Executive
Officer, Belmont Bancorp. and
Belmont National Bank
John H. Goodman, II
Realtor, President, Goodman
Group, Inc.
Mary L. Holloway Haning
Teacher,Mount DeChantal Visitation
Academy
Charles J. Kaiser, Jr.
Attorney-at-Law, Partner,
Phillips, Gardill, Kaiser
and Altmeyer
Terrence A. Lee
Chairman, Belmont Bancorp. and
Belmont National Bank;
CPA, Partner, Lee & Associates
Dana J. Lewis
President, Zanco Enterprises, Inc.
James R. Miller
President, New Philadelphia Fan Company
W. Quay Mull, II
Chairman, Mull Industries, Inc.
Samuel A. Mumley
Executive Secretary,
Ohio Valley Athletic Conference
Tom Olszowy
Independent Insurance Agent,
Tom Olszowy Insurance Agency
Keith A. Sommer
Attorney, Partner, Sommer,
Liberati & Hoffman
William Wallace
Vice President, Belmont Bancorp.;
Executive Vice President and Chief
Operating Officer, Belmont National Bank
Charles A. Wilson, Jr.
Vice Chairman, Belmont Bancorp.
and Belmont National Bank; Ohio State
Representative; President, Wilson Funeral
& Furniture Co.
Belmont Bancorp. Officers
Terrence A. Lee
Chairman
Charles A. Wilson, Jr.
Vice Chairman
J. Vincent Ciroli, Jr.
President and Chief
Executive Officer
William Wallace
Vice President
Jane R. Marsh
Secretary
Belmont National Bank Officers
Terrence A. Lee
Chairman
Charles A. Wilson, Jr.
Vice Chairman
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
William Wallace
Executive Vice President and Chief
Operating Officer
Jane R. Marsh
Senior Vice President, Controller and Cashier
Andrew Beckner
Vice President and Regional Manager
Robert A. Brown
Vice President, Marketing and Product Development Manager
William Busick
Vice President and Regional Manager
J. Douglas Cash
Vice President and Regional Manager
Gerald J. Elliott
Vice President and Compliance Officer
Alison Meeks
Vice President Investment and Trust Services
Robin Morelli
Vice President,Credit Administration
Belmont Financial Network, Inc.
J. Vincent Ciroli, Jr.
Chairman and President
Jane R. Marsh
Secretary and Treasurer
William Wallace
Vice President
Belmont Investment and Financial Services,Inc.
J. Vincent Ciroli, Jr.
President and Chief Executive Officer
William Wallace
Vice President, Secretary and Treasurer
Belmont National Bank Locations
Bellaire Office
Imperial Plaza
330-28th Street
Bellaire, OH 43906
(740) 671-3036
Bridgeport Office
325 Main Street
Bridgeport, OH 43912
(740) 635-1142
Cadiz Office
657 Lincoln Avenue
Cadiz, OH43907
(740) 942-4664
Elm Grove Office
2066 National Road
Wheeling, WV 26003
(304) 243-6570
Jewett Office
318 East Main Street
Jewett, OH 43986
(740) 946-2411
Lansing Office
55160 National Road
Lansing, OH 43934
(740) 635-1454
New Philadelphia Office
152 North Broadway
New Philadelphia, OH 44663
(330) 343-5518
Ohio Valley Mall Office
Ohio Valley Mall
St. Clairsville, OH 43950
(740) 695-9926
The Solution Center
At Plaza West
100 Plaza Drive
St. Clairsville, OH 43950
(740) 695-8484
St. Clairsville Office
154 West Main Street
St. Clairsville, OH 43950
(740) 695-3323
Schoenbrunn Office
2300 East High Avenue
New Philadelphia, OH 44663
(330) 339-9200
Shadyside Office
4105 Central Avenue
Shadyside, OH 43947
(740) 671-9346
Woodsdale Office
980 National Road
Wheeling, WV 26003
(304) 233-9691
Wabash Avenue
Drive-In Office
525 Wabash Avenue
New Philadelphia, OH 44663
Our Internet Address:
www.belmontbank.com
Corporate Information
Stock Listing Belmont Bancorp.'s common stock is
listed on The Small-Cap Market of NASDAQ under
the symbol BLMT. The Transfer Agent is Registrar
and Transfer Company, 10 Commerce Drive,
Cranford, New Jersey 07016, telephone
1-800-368-5948.
Annual Shareholders' All shareholders are invited to attend Belmont
Meeting Bancorp.'s annual meeting to be held at Belmont
National Bank,150 West Main St., St. Clairsville,
Ohio, on Monday, April 20, 1998, at 11 a.m.
Dividend Payment Subject to approval of the board of directors,
dividends are paid on Belmont Bancorp.'s common
stock on or about the 28th day of March, June,
September and December.
Automatic Dividend Through the corporation's Automatic Dividend
Reinvestment Plan Reinvestment Plan, shareholders may elect to
reinvest dividends, and invest optional cash
payments of up to $1,500 per quarter, in additional
shares of Belmont Bancorp.'s common stock at the
market value. To join the plan, please write to
Registrar and Transfer Company, 10 Commerce Drive,
Cranford, New Jersey 07016, or call 1-800-368-5948.
Form 10-K Upon written request of any shareholder on record
on December 31, 1997, the Corporation will provide,
without charge, a copy of its 1997 Annual Report on
Form 10K, including financial statements and
schedules, as required to be filed with the
Securities and Exchange Commission. To obtain a copy
of Form 10-K, contact Teri Walters, Administrative
Officer, Belmont Bancorp., 325 Main Street,
Bridgeport, OH 43912.
Inquiries Inquiries, comments and suggestions concerning
Belmont Bancorp. are welcome. Individual
shareholders, analysts and institutional investors
should contact Ms. Jane Marsh, Secretary,
at 1-740-695-3323 or 1-800-542-0174.
Equal Employment Belmont Bancorp.is committed to providing equal
employment opportunities to every employee and
every applicant for employment, regardless
of, but not limited to such factors as race,
color, religion, sex, national origin, age,
familial or marital status, ancestry, citizenship,
sexual orientation, veteran status or being a
qualified individual with a disability.
Belmont Bancorp.
325 Main Street
Bridgeport, OH 43912
(740)695-3323
Fax:(740) 695-4921
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
( x ) Definitive Proxy Statement by Rule 14a-6(e)(2))
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
BELMONT BANCORP.
_______________________________________________________________________
(Name of Registrant as Specified In Its Charter
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
( X )$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
( )$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( )Fee computed on table below per Exchange Act Rules14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transactions computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( x )Fee paid previously with preliminary materials.
( )Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
BELMONT BANCORP.
April 20, 1998
To the Shareholders of BELMONT BANCORP.:
The Annual Meeting of Shareholders of BELMONT BANCORP. will
be held in the Belmont National Bank conference room at
Belmont National Bank, 150 West Main Street, St.
Clairsville, Ohio, on Monday, April 20, 1998, at 11:00 a.m.
for the following purposes:
1. To elect four (4) persons as Directors to serve for a
three-year term expiring at the annual shareholders'
meeting in 2001.
2. To consider and act upon the proposed Amendment to the
Articles of Incorporation to allow for a two-for-one
split of the common stock.
3. To consider and act upon a proposal to ratify the
appointment of S. R. Snodgrass A.C. as independent
auditors for the year ending December 31, 1998.
4. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Only shareholders of record at the close of business on
February 27, 1998, are entitled to notice of and to vote at
the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN
AND DATE THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT ANY TIME PRIOR
TO THE VOTING THEREOF. THUS, IF YOU ARE PRESENT AT THE
MEETING AND SO REQUEST YOUR PROXY WILL NOT BE USED.
BY ORDER OF THE BOARD OF DIRECTORS.
JANE R. MARSH, Secretary
Bridgeport, Ohio
March 20, 1998
<PAGE>
PROXY STATEMENT
OF BELMONT BANCORP.
325 Main Street
Bridgeport, Ohio 43912
ANNUAL MEETING OF SHAREHOLDERS
April 20, 1998
This Proxy Statement is furnished to the shareholders of
Belmont Bancorp. in connection with the solicitation by the
Board of Directors of Belmont Bancorp. (the "Corporation")
of proxies for the Annual Meeting of Shareholders of the
Corporation to be held on April 20, 1998, in the conference
room of Belmont National Bank, 150 West Main Street, St.
Clairsville, Ohio, and any adjournment thereof. Shares
represented by properly executed proxies received at the
time of the meeting that have not been revoked will be voted
at the meeting in the manner described in the proxies. Any
proxy may be revoked any time before it is exercised.
This Proxy Statement and the accompanying Proxy are being
mailed to shareholders on March 20, 1998.
The Board of Directors has fixed the close of business on
February 27, 1998, as the record date for the determination
of shareholders entitled to notice of and to vote at the
Annual Meeting. On the record date 2,630,498 shares of
Common Stock of the Corporation were outstanding and
entitled to be voted at the meeting. Each share of Common
Stock is entitled to one vote except in the election of
Directors where shareholders are entitled to cumulate their
votes. Cumulative voting permits each shareholder as many
votes as shall equal the number of the shareholders' shares
of Common Stock multiplied by the number of Directors to be
elected, and the shareholder may cast all of such votes for
a single Director, or such votes may be distributed among
the nominees, as each shareholder may see fit.
The proxies are solicited by the Board of Directors of the
Corporation, and the cost thereof is borne by the
Corporation. Proxies may be revoked by the shareholders who
execute them at any time prior to the exercise thereof, by
written notice to the Corporation or by announcement at the
Shareholders' Meeting. Unless so revoked, the shares
represented by all proxies will be voted by the persons
named in the proxies at the Shareholders' Meeting and at all
adjournments thereof, in accordance with the specifications
set forth therein, or, absent such specifications, in
accordance with the judgment of the holders of such proxies.
PROPOSAL NUMBER 1: ELECTION OF DIRECTORS
The Board of Directors of the Corporation by resolution at
its meeting on January 19, 1998, set the number of Directors
at fourteen (14) members with four (4) members to be elected
to the class which expires at the annual meeting in 2001.
All nominees are currently Directors of the Corporation and
its principal subsidiary, Belmont National Bank. Each of
the nominees to be elected has continuously served in the
principal occupation shown for the past five years.
The following persons have been nominated for election to
the Board of Directors to serve for a three-year term
expiring at the annual shareholders' meeting in 2001:
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
J. Vincent Ciroli, Jr. 52 1984 14,149 *
President & Chief Executive Officer,
Belmont Bancorp. and
Belmont National Bank
John H. Goodman, II 53 1974 55,946(1) 2.13
Realtor, President
Goodman Group, Inc.
Keith A. Sommer 57 1995 3,854 *
Attorney, Partner, Sommer,
Liberati & Hoffman
James R. Miller 55 1995 500 *
President, New Philadelphia Fan
Company (Jan. 1997 to Present)
Vice President & General Manager,
Joy Technologies Inc.
(April 1992-Dec. 1996)
Footnotes
1. This amount includes 3,567 shares held in the name of
Marylouise Goodman IRA, and 170 shares held in the name of
Marylouise Goodman, wife of John H. Goodman, II, to which
Mr. Goodman disclaims any beneficial interest. This amount
also includes 26,352 shares held in the name of John H.
Goodman, II and Terrence A. Lee, Trustees under a trust
dated February 2, 1991, to which Mr. Goodman disclaims any
beneficial interest. This amount also includes 2,015 shares
held by John H. Goodman, II and J. Harvey Goodman, Trustees
under a trust dated February 13, 1995 and 5,094 shares held
by J. Harvey Goodman and John H. Goodman, II, Trustees under
a trust dated April 26, 1995.
* Denotes less than a 1% interest.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE
ABOVE NOMINEES TO THE BOARD OF DIRECTORS OF BELMONT BANCORP.
In addition to the foregoing nominees, the following persons
are presently serving as members of the Board of Directors:
Directors Whose Term of Office Will Expire at the Annual
Shareholders' Meeting in 1999
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
Mary L. Holloway Haning 42 1993 1,983 (2) *
Teacher, Mount De Chantal School
(Sept. 1996 - Present)
Special Projects Coordinator,
Plastic Surgery, Inc.
(Sept. 1995-Sept. 1996)
Director of Admissions,
Wheeling Country Day School (1987-1995)
Charles J. Kaiser, Jr. 48 1979 13,185 (3) *
Attorney, Partner, Phillips, Gardill,
Kaiser & Altmeyer
Samuel A. Mumley 66 1996 287 *
Executive Secretary,
Ohio Valley Athletic Conference
Thomas Olszowy 51 1993 20,060 (4) *
Independent Insurance Agent,
Tom Olszowy Insurance Agency
Charles A. Wilson, Jr. 55 1973 26,778 (5) 1.02
Ohio State Representative;
President, Wilson Funeral &
Furniture Co.
Footnotes
2. This amount includes 1,280 shares held for the benefit
of Mary L. Holloway Haning in trust in which Wesbanco Bank
Wheeling is trustee.
3. This amount includes 90 shares held in the name of
Deborah P. Kaiser, IRA, wife of Charles J. Kaiser, Jr., to
which Mr. Kaiser disclaims any beneficial interest and 750
shares held in the name of Marchak Investment Co., a
partnership, in which Mr. Kaiser is a general partner and
holds a substantial beneficial interest.
4. This amount includes 15,127 shares held in the names of
Tom and Diana Olszowy joint tenants with right of
survivorship in which Mr. Olszowy shares voting and
investment power. This amount also includes 377 shares held
in the name of Tom Olszowy, custodian for Dana Paul Olszowy,
and 1,002 shares held in the name of Tom Olszowy, custodian
for Jonathan T. Olszowy, to which Mr. Olszowy disclaims any
beneficial interest.
5. This amount includes 3,902 shares held in the name of
Wilson Funeral and Furniture Company of which Mr. Wilson is
President, holds a substantial stock interest and has voting
power.
Directors Whose Term of Office Will Expire at the Annual
Shareholders' Meeting in 2000
Common Stock
Name And Year First % of
Principal Occupation Age Elected Amount Total
John A. Belot 55 1979 24,000 (6) *
President,
Walden Industries, Inc.
Terrence A. Lee, CPA 48 1987 2,180 (7) *
Chairman, Belmont Bancorp.
and Belmont National Bank;
Partner, Lee & Associates
Dana J. Lewis 54 1994 20,821 *
President, Zanco Enterprises, Inc.
New Philadelphia, Ohio; Owner/
Operator of McDonalds restaurants
W. Quay Mull, II 55 1984 15,742 (8) *
Chairman of the Board
Mull Industries, Inc.
William Wallace 42 1991 17,852 (9) *
Executive Vice President &
Chief Operating Officer,
Belmont National Bank;
Vice President, Belmont Bancorp.
Footnotes
6. This amount includes 7,905 shares held jointly by Terry
L. Belot, wife of John A. Belot, and Jason Michael Belot,
son of John A. Belot; 7,905 shares held jointly by Terry L.
Belot and John A. Belot, Jr., son of John A. Belot; 4,468
shares held in the name of Jason Michael Belot; and 686
shares held in the name of John A. Belot, Jr. Mr. John A.
Belot has retained voting rights with respect to these
shares. This amount also includes 1,250 shares held in the
name of Terry L. Belot, IRA, to which Mr. Belot disclaims
any beneficial interest.
7. This amount includes 16 shares held in the name of
Terrence A. Lee, Custodian for Katherine M. Lee, UOTMA; 16
shares held in the name of Terrence A. Lee, Custodian for
Natalie A. Lee, UOTMA; and 16 shares held in the name of
Terrence A. Lee, Custodian for Tara N. Lee, UOTMA; Mr. Lee's
minor daughters. This amount does not include 26,352 shares
held in the name of John H. Goodman, II and Terrence A. Lee,
Trustees for a trust dated February 2, 1991, to which Mr.
Lee disclaims any beneficial interest.
8. This amount includes 8,040 shares held in the name of
Mull Machine Company of which Mr. Mull is President and
holds a substantial ownership interest.
9. This amount includes 3,347 shares held jointly with
Christine Wallace, Mr. Wallace's wife, in which he shares
voting and investment power; 2,733 shares held in the name
of Christine Wallace, IRA, to which Mr. Wallace disclaims
any beneficial interest; 577 shares held in the name of
William Wallace as Custodian for Joseph J. Wallace, UWVTMA;
577 shares held in the name of William Wallace as Custodian
for Lauren C. Wallace, UWVTMA; 535 shares held in the name
of William Wallace as Custodian for Adrienne C. Wallace,
UWVTMA; and 494 shares held in the name of William Wallace
as Custodian for William J. Wallace, UWVTMA; Mr. Wallace's
minor children.
As of February 27, 1998, the Directors and Officers of the
Corporation as a group beneficially owned 219,181 shares or
8.33 percent of the outstanding common stock of the
Corporation.
PROPOSAL NUMBER 2: AMENDMENT TO THE CORPORATION'S
ARTICLES OF INCORPORATION TO ALLOW FOR 2-FOR-1 STOCK SPLIT
Subparagraph (1) of Article FOURTH of the Corporation's
Amended Articles of Incorporation currently provides the
authority to issue 9,000,000 shares of capital stock of
which 8,900,000 shall be common shares with a par value of
$0.50; 10,000 shares shall be Senior Cumulative Preferred
Stock with a par value of $100 per share; and 90,000 shares
of undesignated preferred shares without par value but
subject to the provisions of subparagraph (2) of Article
FOURTH. Subparagraph (2) grants to the Board of Directors
the authority to designate the powers, rights, preferences
and other matters related to the Preferred Stock. The
10,000 shares of Senior Cumulative Preferred Stock have been
redeemed and cancelled, and thus cannot be reissued. There
are 2,644,163 shares of Common Stock presently issued and
2,630,498 shares outstanding.
On February 27, 1998, the Corporation's Board of Directors
unanimously adopted a resolution authorizing a two-for-one
split of the common stock subject to the approval by the
shareholders at its annual meeting. This approval will
require an Amendment to the Articles of Incorporation
increasing the number of authorized shares of capital stock
to 17,890,000 shares divided into 90,000 shares of preferred
stock without par value but subject to the provisions
subparagraph (2) of Article FOURTH and 17,800,000 shares of
common stock with a par value of $0.25 per share.
Specifically, if adopted, the amendment would delete
subparagraph (1) of Article FOURTH of the Amended Articles
of Incorporation and substitute the following:
(1) The total number of shares of stock which the
Corporation shall have the authority to issue is
17,890,000 shares which shall be divided into
17,800,000 shares of Common Stock with a par value
of $0.25 per share, and 90,000 shares of Preferred
Stock without par value which shall be subject
to the provisions of subparagraph (2) below.
If this Amendment is adopted, the 2-for-1 stock split will
be effective for stock of record May 1, 1998, and
certificates for additional shares are expected to be
distributed on May 22, 1998. The change in par value of the
common stock will not affect the certificates representing
shares of common stock presently outstanding, as all common
stock outstanding will be deemed to have a par value of
$0.25 per share, and accordingly, it will not be necessary
for any shareholder to exchange certificates representing
currently outstanding shares. If this Amendment is adopted,
there will be no change in the Common Stock portion of the
Shareholders' Equity portion of the Corporation's Balance
Sheet.
The Board of Directors believes that the proposed stock split will
enhance the marketability of the shares because each share of the
present common stock with a par value of $0.50 will, if the proposal
is approved, become 2 shares with a par value of $0.25 per share.
Except for the reduction in the par value and the increase in the
number of shares, the stock split will not in any way affect the
rights or interests of the stockholders.
Nevertheless, as a result of the stock split the Corporation will have
12,511,674 shares of authorized but unissued stock. Such authorized
but unissued stock could be used by the Corporation to raise additional
capital by sale of stock to the public, to acquire other financial
institutions or related businesses, or in a merger or consolidation.
Depending upon the sale price of the stock or the value of the acquired
business in any acquisition or merger, such a transaction could be
dilutive to existing shareholders. At the present time no such stock
sale, acquisition or merger is contemplated. Moreover, the authorized
but unissued stock could be employed as a denfensive anti-takeover
safeguard in the event that the Corporation should be targeted for a
takeover by outside interests. The mere availability of such stock in
itself could serve as a deterrent to the initiation of a hostile
takeover effort. Furthermore, any increase in the number of shares
outstanding, through the sale or distribution of authorized but unissued
shares, would make the acquisition of a controlling stock interest in
the Corporation proportionately more difficult and expensive. The
Board of Directors has no present intention of issuing additional shares for
such purposes and has no present knowledge of any such takeover efforts.
Adoption of the Amendment requires the affirmative vote by
shareholders holding a majority of the outstanding shares at
a meeting at which a quorum is present. The Board of
Directors unanimously recommends a vote FOR the Amendment.
Proxies not otherwise specified will be voted in favor of
the Amendment.
Transactions with Directors and Officers
Certain Directors and Executive Officers and their
associates were customers of and had transactions with the
Bank in the ordinary course of the Bank's business during
1997. From time to time the law firms of Phillips, Gardill,
Kaiser & Altmeyer, of which Charles J. Kaiser, Jr. is a
partner, and Sommer, Liberati & Hoffman, of which Keith A.
Sommer is a partner, have rendered legal services to the
Corporation and the Bank. Messrs. Kaiser and Sommer are
directors of both the Corporation and the Bank. It is
contemplated that these firms will be retained to perform
legal services during the current year.
Meetings of the Board of Directors and Committees and
Compensation of Members
The Board of Directors of the Corporation met six (6) times
during the year 1997. Each member of the Board of Directors
of the Corporation attended seventy-five percent (75%) or
more of the total number of meetings of the Board and its
committees of which they were members. The Board of
Directors of Belmont National Bank met fifteen (15 ) times
during 1997. The Directors of the Corporation and the Bank
are the same.
The Board of Directors elects an Executive Committee
annually. Messrs. Ciroli, Goodman, Kaiser, Lee, Mull,
Olszowy and Wilson are members of the Executive Committee of
both the Corporation and the Bank. Meetings of the
Executive Committee are called to consider Corporation or
Bank business which may arise between normally scheduled
meetings or to consider in depth policies and make
recommendations to the Board of Directors. The Executive
Committee of the Bank met three (3) times during 1997.
The Executive Committee of the Corporation also serves as a
Nominating Committee. As such, the Committee seeks and
recommends individuals for nomination as directors. The
Nominating Committee will consider as prospective directors
persons suggested to them by any shareholder.
Messrs. Goodman, Kaiser, Lee, Miller, Mull and Olszowy are
members of the Audit Committee of the Bank and the
Corporation. The Audit Committee reviews the reports of the
Bank's internal auditor, the Bank's compliance officer, and
the reports of the Corporation's independent Certified
Public Accountants, the adequacy of internal controls and
procedures, and reports to the Board of Directors of the
Corporation and the Bank. This Committee met five (5) times
during 1997.
The Bank also has a Trust Committee that met three (3) times
in 1997 whose members are Ms. Haning and Messrs. Belot,
Lewis, Mumley, Sommer, Wallace and Wilson. The Trust
Committee of the Bank approves the operations of the Trust
Department and reports to the Board of Directors.
Directors who are not employees of the Corporation or the
Bank receive an annual retainer fee of Two Thousand Dollars,
payable quarterly in arrears, plus an attendance fee of Two
Hundred Dollars for each Bank or Committee Meeting attended.
Also, Directors receive an attendance fee of One Hundred
Dollars per regularly scheduled quarterly Bancorp. Meeting,
not to exceed Four Hundred Dollars annually. During 1997, a total
of $78,500.00 was paid to Directors. For the year 1998, the
annual retainer has been increased to Three Thousand Dollars
and the attendance fee increased to Three Hundred Dollars per
meeting. The separate fee for Bancorp. meetings has been
eliminated.
In addition to the fees paid to Directors, Mr. Richard G.
Anderson and Mr. Wilbur L. Terhune, each of whom is a
retired Chairman of the Board, received payments under a
Deferred Compensation Plan adopted by the Board of Directors
on December 15, 1983. Mr. Anderson received $2,312.70 and
Mr. Terhune received $6,030.96 during 1997 under this plan.
The Deferred Compensation Plan provided an early retirement
benefit to covered individuals equal to eighty percent (80%)
of a factor corresponding to the number of years the
employee's early retirement date preceded his normal
retirement date, multiplied by the employee's average
compensation as defined under the Bank's retirement plan,
minus the employee's monthly accrued benefit under the
Bank's retirement plan on a straight life annuity basis.
This amount is further reduced by the employee's primary
social security benefit. Mr. Terhune's benefit is further
reduced by a pension which he receives from a plan unrelated
to the Corporation or the Bank.
EXECUTIVE COMPENSATION
The Executive Committee without the executive officers but
with the addition of James R. Miller and Keith A. Sommer
serves as the Compensation Committee for Belmont National
Bank. The officers of the Corporation are currently serving
without compensation from Belmont Bancorp. They are,
however, compensated by Belmont National Bank for services
rendered as officers of the Bank. This Committee is
responsible for advising the Board regarding compensation
levels for the President and CEO, J. Vincent Ciroli, Jr.;
the Executive Vice President and COO, William Wallace; and
the Senior Vice President, Controller and Cashier, Jane R.
Marsh. The Committee also consults with senior officers
with respect to the compensation and benefits of other
officers and employees of the Corporation.
Compensation Philosophy
The Corporation bases different portions of its executive
compensation program on differing measures of corporate
performance. As a result, the Corporation's compensation
program currently reflects the following themes:
A material portion of compensation should be meaningfully
related to corporate performance.
Since the Corporation has chosen a senior executive team
to manage the operations of the Corporation, bonus compensation
for these senior executives should be based on team effort and
performance of the Corporation as a whole.
Bonus compensation should be related to the return on
shareholders' equity and should be payable only if the
shareholders have received a reasonable return
on the equity.
Compensation should play a critical role in attracting
and retaining executives whom the Corporation deems most
able to further its goals and, therefore, should be
comparable to compensation paid by peer organizations in
the same region of the country that the Corporation operates.
Summary Compensation Table
For the year ended December 31, 1997, J. Vincent Ciroli,
Jr., William Wallace and Jane R. Marsh were the only
officers compensated in excess of $100,000. Their
compensation is summarized in the following table:
<TABLE>
<CAPTION>
Long Term
Name and Incentive All Other
Principal Position Year Salary Bonus Compensation (1) Compensation
<S> <C> <C> <C> <C> <C>
J. Vincent Ciroli, Jr. 1997 $152,000.00 $ 26,600.00 $26,600.00 $15,707.59
President & 1996 $152,000.00 $ 68,400.00 - $16,767.99
Chief Executive Officer 1995 $145,000.00 $116,000.00 - $14,159.04 Belmont Bancorp. and
Belmont National Bank
William Wallace 1997 $110,000.00 $ 19,250.00 $19,250.00 $12,420.97
Vice President, 1996 $110,000.17 $ 49,500.00 - $15,722.09
Belmont Bancorp. and 1995 $105,000.00 $ 84,000.00 - $11,162.44
Executive Vice President &
Chief Operating Officer,
Belmont National Bank
Jane R. Marsh 1997 $ 70,000.00 $ 12,250.00 $12,250.00 $11,350.80
Secretary, Belmont 1996 $ 70,000.01 $ 31,500.00 - $ 9,915.19
Bancorp. and Senior 1995 $ 58,000.02 $ 46,400.00 - $ 6,097.44
Vice President, Controller,
and Cashier, Belmont
National Bank
(1) See the description for the Long Term Incentive Compensation under the
heading "Annual Bonus Incentives".
Pay Mix and Measurement
The Corporation's executive compensation program is based on
three components, each of which is intended to serve the
overall compensation philosophy.
Base Salary is targeted at the competitive median for peer
banking organizations. In order to determine these amounts,
the Committee has utilized the Sheshunoff tables, the
Executive Studies Group (a division of Ben S. Cole
Financial, Inc.), and the Bank Wage-Hour & Personnel
Service. During 1997, the Committee retained Bank
Compensation Strategies Group located in Dublin, Ohio, to
advise it and the Board concerning salaries for comparable
officers at other Ohio and regional banking organizations of
similar size. Salaries for the executive officers named in
the Summary Compensation Table are reviewed by the Committee
on an annual basis and may be increased or decreased at that
time based on the Committee's analysis of how the management
team and the respective individual contributes to the
Corporation, as well as increases in median competitive pay
levels.
Annual Bonus Incentives for executive officers are intended
to reflect the Corporation's belief that management's
contribution to corporate performance comes, in part, from
maximizing the Corporation's return on common shareholders'
equity. Accordingly, since 1989 the Board of Directors has
had in place an Executive Incentive Compensation Plan to
provide incentive compensation based upon the earnings of
Belmont National Bank. Amounts paid under the Plan are
included in the "Bonus" column in the Summary Compensation
Table above. The individuals covered by the Plan are J.
Vincent Ciroli, Jr., William Wallace and Jane R. Marsh.
During 1997, the Compensation Committee retained Bank
Compensation Strategies Group of Dublin, Ohio, to advise the
Committee and the Board on changes to the Executive
Incentive Compensation Plan designed in part to: (i) allow
additional senior executives to be added to the Executive
Incentive Compensation Plan without disrupting the formula;
and (ii) requiring half of each year's bonus to be deferred
and held as phantom stock of the Corporation which is hoped
will enhance the senior executives' interest in the long-
term appreciation of the Corporation's stock. The revised
Senior Executive Incentive Plan adopted during 1997 pays an
incentive bonus calculated as a percentage of salary varying
between 10% and 80% when the Corporation's return on equity
exceeds the average return on equity of a peer group. No
award is made unless the Corporation's return on equity is
at least 10% greater than the peer group average. Half of
any bonus is paid to the executive in cash and the other
half is credited to a non-qualified deferred compensation
plan that invests in the Corporation's phantom stock. That
amount is shown as Long Term Incentive Compensation in the
Summary Compensation Table. The plan is a phantom stock
plan because the portion of the bonus paid to the plan is
converted to units designed to appreciate or depreciate in
relation to the appreciation or depreciation of the
Corporation's common stock. Upon termination of employment
for reasons of death, disability, retirement or any other
reason the executive will be paid his benefit in cash over
a period of years. The Committee believes that the program,
as revised, provides an appropriate link between the
Corporation's short-term performance and long-term performance
(as measured by the appreciation of its stock) and the
incentives paid to the executive officers. The return on
equity goal is established by the Committee annually.
Other Compensation is provided so that the Corporation's
overall benefits are comparable with other similar
organizations so as to attract and retain competent
management.
The Bank has a Defined Contribution 401(k) Savings Plan
which allows employees who work over 1,000 hours per year to
defer up to 10% of their pre-tax salary to the Plan. The
Bank matches fifty percent (50%) of the first four percent
(4%) deferred. The Bank may also make voluntary contributions
to the Plan. In 1997, the Bank paid $36,459.49 in matching
funds and made a voluntary contribution of $208,055.29, or
nine percent (9%) of annual salary. In 1997, the profit
sharing contribution attributed to Mr. Ciroli was $12,672.00;
the matching funds contribution was $2,305.99. The profit
sharing contribution paid for Mr. Wallace was $10,422.01;
the matching funds contribution was $1,751.46. The profit
sharing contribution paid for Mrs. Marsh was $10,058.40 and
the matching funds contribution was $1,292.40. This compensation
is included in the "All Other Compensation" column in the Summary
Compensation Table above.
The Bank provides reimbursement for club fees, membership
dues and entertainment expenses for business use by Mr.
Ciroli and Mr. Wallace. The Bank also provides Mr. Ciroli
and Mr. Wallace with the use of a company car. Personal
benefits from such expenditures are less than 10% of salary
and bonus and, therefore, have been excluded from the
Summary Compensation Table above.
The Bank maintains a split-dollar life insurance plan for
several of its officers. Under the plan, the Bank maintains
ownership of all cash value in the insurance policies and a
portion of the death benefits. The participant's named
beneficiary is entitled to three times the participant's
annual salary at his death. Annually, the participant
recognizes taxable income to the extent of the assumed term
cost of the coverage. At the death of the participant, the
Bank's share of the death benefit will be sufficient to
recover all costs associated with the plan. For 1997, the
amount of income attributable for a split-dollar insurance
plan was $729.60, $247.50 and $126.00 for Mr. Ciroli, Mr.
Wallace and Mrs. Marsh respectively. These amounts are
included in the "All Other Compensation" column in the
Summary Compensation Table above.
The Corporation adopted a Supplemental Retirement Plan for
the three executive officers at its meeting on January 18,
1994, and subsequently amended the plan on December 19,
1995, in order to augment the retirement benefits payable to
these officers and make them more comparable to the benefits
provided under the defined benefit plan which was terminated
in 1990. The persons covered under the plan are J. Vincent
Ciroli, Jr., President and Chief Executive Officer; William
Wallace, Vice President of the Corporation and Executive
Vice President and Chief Operating Officer of the Bank; and
Jane R. Marsh, Secretary of the Corporation and Senior Vice
President, Controller and Cashier of the Bank. Under the
Plan the Corporation credited the sum of $163,000 to a book
reserve account for the benefit of Mr. Ciroli, the sum of
$19,000 for Mr. Wallace and the sum of $3,000 for Ms. Marsh.
The balance in the book reserve account will be invested as
directed by the Board and distributed to the officer over a
ten (10) year period following retirement. The officer will
bear the risk of earnings in the book reserve account.
Under the Plan the maximum amount that can be paid to Mr.
Ciroli is $43,000 per annum; to Mr. Wallace $40,000 per
annum; and to Ms. Marsh $11,250 per annum. The supplemental
retirement benefits may be forfeited if the employee is
terminated for cause.
COMPENSATION COMMITTEE
John H. Goodman, II W. Quay Mull, II
Charles J. Kaiser, Jr. Thomas Olszowy
Terrence A. Lee Keith A. Sommer
James R. Miller Charles A. Wilson, Jr.
Stock Price Performance Graph
The following graph compares for each of the last five years
ending December 31 the cumulative total return of the
Corporation's Common Stock, All Nasdaq U.S. Stocks Index and
SNL Securities' Index of Banks with Assets Size less than
$500 million. The cumulative total return of the
Corporation's Common Stock assumes $100 invested on December
31, 1992 and assumes reinvestment of dividends.
Belmont Bancorp. Stock Price Performance
Total return performance assuming reinvestment of dividends
MEASUREMENT PERIOD
Index 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Belmont Bancorp. 100.00 109.33 204.75 383.05 376.85 783.55
NASDAQ-Total U.S. 100.00 114.80 112.21 158.70 195.19 239.53
SNL<$500M Bank Index 100.00 130.56 140.42 192.09 247.24 421.47
PROPOSAL NUMBER 3: SELECTION OF AUDITORS
The Board of Directors has retained S.R. Snodgrass A.C. as
independent auditors for both the Corporation and the Bank
for the year ending December 31, 1998. There will be
presented to the shareholders at the Annual Meeting a
proposal that this selection be ratified by the
shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THIS SELECTION BE SO RATIFIED. The services rendered
by S.R. Snodgrass A.C. during the year 1997 involved
auditing services primarily and consisted of the examination
of the financial statements of the Corporation and its
subsidiaries, principally the Bank. It is expected that a
representative of the accounting firm will be present at the
shareholders' meeting. Such representative will be given
the opportunity to make a statement if he desires to do so,
and will be available to respond to appropriate questions
from the shareholders who are present.
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors, executive officers,
and persons who own more than 10% of a registered class of
the Corporation's equity securities to file with the
Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common
Stock of the Corporation. Officers, directors and greater
than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms
they file. To the Corporation's knowledge, based solely on
a review of the copies of such reports furnished to the
Corporation and written representations that no other
reports were required, during the two fiscal years ended
December 31, 1997, all section 16(a) filing requirements
applicable to the Corporation's officers, directors, and
greater than 10% beneficial owners were complied with.
Other Matters
As of the date of this Proxy Statement, the Board of
Directors and Management were unaware of any matters not
referred to in this proxy statement for action at the
meeting. If any other business comes before the meeting,
the persons named in the proxy will have the authority to
vote the shares represented by them in accordance with their
best judgment.
Method and Cost of Solicitation
The solicitation of proxies will be made primarily by mail.
Proxies may also be solicited personally and by telephone by
regular employees and Directors of the Corporation and the
Bank without any additional remuneration and at minimal
cost. Management intends to request banks, brokerage
houses, custodians, nominees, and fiduciaries to obtain
authorization for the execution of proxies. The Corporation
will bear the entire cost of soliciting proxies.
Shareholder Proposals for Next Year's Annual Meeting
Proposals which shareholders intend to present at next
year's annual meeting, now scheduled to be held on April 19,
1999, will be eligible for inclusion in the Corporation's
proxy material for that meeting if they are submitted to the
Corporation in writing no later than November 20, 1998. At
the time of the submission of the proposal, a proponent may
also submit a statement in support of the proposal. The
proposal and its supporting statement in the aggregate
shall not exceed 500 words. When submitted to the
Corporation, a proposal should be accompanied by a written
notice of the proponent's intention to appear personally at
the meeting for the purpose of presenting the proposal for
action.
Bridgeport, Ohio BY ORDER OF THE BOARD OF DIRECTORS
March 20, 1998 J. VINCENT CIROLI, JR., PRESIDENT & CEO
<PAGE>
APPENDIX A
PROXY
BELMONT BANCORP., BRIDGEPORT, OHIO
ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1998
KNOW ALL MEN BY THESE PRESENT that I the undersigned Shareholder of
BELMONT BANCORP. do hereby nominate, constitute and appoint David L. Barnes
and Kelley Archer, or either of them, my true and lawful attorney with full
power of substitution, for me and in my name, place and stead to vote all
of the Common Stock of said Corporation standing in my name at the Annual
Meeting of its Shareholders to be held at Belmont National Bank, 150 West
Main Street, St. Clairsville, Ohio, on April 20, 1998, at 11:00 A.M., or at
any adjournments thereof with all the powers the undersigned would possess
if personally present as follows:
1. For the election to the Board of Directors, except as otherwise
specified below, of the following nominees, or any one or more of them to
serve a three-year term expiring at the annual shareholders' meeting in
2001:
J. Vincent Ciroli, Jr. Keith A. Sommer
John H. Goodman, II James R. Miller
with full authority to cumulate the votes represented by such shares and to
distribute the same among the nominees in such manner and numbers as said
proxies in their discretion may determine.
THE AUTHORITY TO VOTE FOR THE ELECTION OF ANY OF THE NOMINEES LISTED ABOVE
MAY BE WITHHELD BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE
NOMINEE.
For 2. To consider and act upon the proposed Amendment to the
Against Articles of Incorporation to allow for a two-for-one
Abstain split of the common stock.
For 3. To consider and act upon a proposal to ratify the
Against appointment of S.R. Snodgrass A.C. as independent
Abstain auditors for the year ending December 31, 1998.
For 4. In accordance with the judgment of the said proxies to vote
Against upon such other matters as may be presented for
Abstain consideration and action.
DATED _____________________ ______________________________________________
______________________________________________
Signature(s)
When signing in a fiduciary capacity, please
give full title.
All joint owners should sign.
Please sign, date and return your Proxy promptly in the enclosed envelope
to BELMONT NATIONAL BANK, 154 West Main Street, St. Clairsville, Ohio
43950.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
ALL OF THE ABOVE ITEMS.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10265
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 121156
<INVESTMENTS-CARRYING> 15955
<INVESTMENTS-MARKET> 16181
<LOANS> 224900
<ALLOWANCE> 4134
<TOTAL-ASSETS> 388713
<DEPOSITS> 263908
<SHORT-TERM> 19891
<LIABILITIES-OTHER> 3380
<LONG-TERM> 69635
0
0
<COMMON> 1321
<OTHER-SE> 30578
<TOTAL-LIABILITIES-AND-EQUITY> 388713
<INTEREST-LOAN> 19475
<INTEREST-INVEST> 8873
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 28348
<INTEREST-DEPOSIT> 10063
<INTEREST-EXPENSE> 14004
<INTEREST-INCOME-NET> 14344
<LOAN-LOSSES> 1055
<SECURITIES-GAINS> 799
<EXPENSE-OTHER> 8732
<INCOME-PRETAX> 7366
<INCOME-PRE-EXTRAORDINARY> 5945
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5945
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.25
<YIELD-ACTUAL> 4.37
<LOANS-NON> 1515
<LOANS-PAST> 44
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3693
<ALLOWANCE-OPEN> 3153
<CHARGE-OFFS> 90
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 4134
<ALLOWANCE-DOMESTIC> 4134
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2943
</TABLE>
